The last time affected in 2022
The solar industry has been grappling with elevated shipping costs and supply disruptions for several years. The global ocean freight system experienced severe disruptions beginning in early 2019, primarily driven by the COVID-19 pandemic. These disruptions led to a dramatic increase in international container freight rates, with prices reaching nearly $10,400 in September 2021. By June 2022, the global freight rate index was almost $7,100.
These elevated freight costs and supply-chain disruptions have significantly affected all industries, with the solar PV sector being particularly hard hit. Due to the high concentration of solar panel manufacturing in China, the solar industry has faced increased costs not only for solar panels but also for other system components like trackers, inverters, and batteries.
Rabobank’s “Global Ocean Freight Outlook” report from 2022 predicted a gradual decline in container freight prices over the following 12 months. However, they did not expect prices to return to pre-pandemic levels. Viet Nguyen, a global supply chain analyst at RaboResearch, noted that shipping container prices were unlikely to revert to the low pre-pandemic rates of around $3,000 per container. Instead, a decrease from the 2022 level of $7,000 to between $7,800 was anticipated in the coming year.
Current Situation in 2024: Continued Challenges
Despite earlier predictions, sea freight prices have continued to surge in 2024, significantly affecting China’s solar products. This unexpected rise in prices occurred during what is typically considered the off-season for shipping.
Recent Surge in Ocean Freight Prices
Sea freight prices have been on an upward trend since early May 2024. Costs from Asia to Europe and the Americas have risen significantly, with increases of $100-$500 for a 40HQ container. By early June 2024, these increases reached $500-$1,000. Current shipping costs from major Chinese ports like Shenzhen, Ningbo, and Shanghai to Los Angeles have doubled, now ranging from $5,500 to $6,500 for a 40HQ container. The cost to New York is even higher, at $7,000-$8,500 per 40HQ container. Freight costs to major European ports such as Felixstowe, Hamburg, Rotterdam, and Antwerp have also more than doubled.
Factors Contributing to Increased shipping Costs
Several factors have contributed to the rise in sea freight costs, including:
- Red Sea Crisis: The Asia-Europe shipping route has been disrupted, requiring a detour via the Cape of Good Hope. This has increased shipping time by over 15% and created a 10-15% capacity gap.
- Water Shortage in the Panama Canal: Reduced water levels have slowed ship traffic and limited cargo capacity, leading to delays and higher rates.
- Impact of Customs Duties: Tariff increases in countries like Brazil and Mexico have led to a surge in exports, particularly for large products like electric cars, further straining capacity.
- Congestion at the Port of Singapore: Delays in docking and transit times have led to slower shipping and higher rates.
- Reselling Cargo Space: Speculators controlling shipping space and selling it at higher prices have contributed to price hikes.
Risk of Rising Prices
The rapid rise in shipping costs poses risks for buyers, sellers, and end customers. Buyers face higher costs, which can disrupt the capital chain, while sellers may see reduced profits or losses on orders. End customers might pay more for products or experience reduced quality.
Coping with Rising Shipping Costs
- For Buyers: Consider waiting if goods are not seasonal or urgently needed, and maintain communication with freight forwarders to stay updated on rates and availability.
- For Sellers: Focus on cash flow management and be prepared for potential drops in turnover.
- For Freight Forwarders: Communicate closely with buyers and sellers, ensure timely payments, and keep customers informed about port congestion and rate changes
Rising freight rates continue to pose significant challenges for the solar industry. Close collaboration and strategic adjustments are essential for buyers, sellers, and freight forwarders to navigate these changing market conditions.
As a distributor of Deye solar products, they’ve told us the cost for every model will increasing 20 to 40 Eur average, we hope the shipping cost will back to normal range in the short time!