Key trade route for solar modules affected by Red Sea shipping crisis
PORTS & SHIPPING

Key trade route for solar modules affected by Red Sea shipping crisis

Solar module prices have risen by up to 20% due to trade disruptions in the Red Sea, which carries 12% of the world's seaborne trade. The recent spike in freight costs is a result of heightened hostilities from Houthi militia targeting vessels passing through the Red Sea since mid-November.

As a result, many merchant fleets are avoiding this key trade route, and ships are forced to go around Africa's Cape of Good Hope, adding 9,600 km to their voyage. This has amplified the cost of fuel and the time required to transport solar modules, with an additional two weeks of transit time added due to the rerouting.

"The logistics premium pertaining to the Houthi attacks on Red Sea shipping is $0.01 to $0.02 per watt. For context, the global benchmark price for crystalline modules is $0.10 per watt. So, we are looking at an extra 10% to 20% surge in module price," said Pavel Molchanov, an investment bank Raymond James, analyst.

Manufacturers in China make most of the world's solar photovoltaic modules, with Europe importing 84% of its installed solar photovoltaic modules in the last five years. As a result, Europe is heavily reliant on China for its solar modules. However, according to REC Silicon, a Norway-based polysilicon manufacturer, the Red Sea crisis has affected scheduling and freight costs in European routes. The company makes solar-grade polysilicon, a key ingredient for manufacturing solar panels in various markets. Solar tracker firm NEXTracker has also warned that some shipments are being rerouted due to the conflict, which impacts deliveries and costs.

Last year, the European Parliament voted to increase the share of renewable energy to 42.5% by 2030, driving demand for solar modules. However, the increase in the cost of modules is not affecting the capital expenditure of building a solar project just yet. As a percentage of the all-in, fully installed system cost, the jump in prices of solar modules represents only about 1% to 2%.

The Chinese supplier said that slimmer margins have manufacturers concerned, especially if customers compel them to cover freight to project sites. The margins had already depleted due to historically low prices. Because the cost of modules has fallen significantly, the additional cost is being absorbed without any issues. Two weeks of additional transit time must be built into the supply chain and inventories.

Suppliers said they hope that this is a short-term situation that will be resolved. If not, they will have to explore the long-term viability of alternative routes and a comparative increase in shipping prices.

Solar module prices have risen by up to 20% due to trade disruptions in the Red Sea, which carries 12% of the world's seaborne trade. The recent spike in freight costs is a result of heightened hostilities from Houthi militia targeting vessels passing through the Red Sea since mid-November. As a result, many merchant fleets are avoiding this key trade route, and ships are forced to go around Africa's Cape of Good Hope, adding 9,600 km to their voyage. This has amplified the cost of fuel and the time required to transport solar modules, with an additional two weeks of transit time added due to the rerouting. The logistics premium pertaining to the Houthi attacks on Red Sea shipping is $0.01 to $0.02 per watt. For context, the global benchmark price for crystalline modules is $0.10 per watt. So, we are looking at an extra 10% to 20% surge in module price, said Pavel Molchanov, an investment bank Raymond James, analyst. Manufacturers in China make most of the world's solar photovoltaic modules, with Europe importing 84% of its installed solar photovoltaic modules in the last five years. As a result, Europe is heavily reliant on China for its solar modules. However, according to REC Silicon, a Norway-based polysilicon manufacturer, the Red Sea crisis has affected scheduling and freight costs in European routes. The company makes solar-grade polysilicon, a key ingredient for manufacturing solar panels in various markets. Solar tracker firm NEXTracker has also warned that some shipments are being rerouted due to the conflict, which impacts deliveries and costs. Last year, the European Parliament voted to increase the share of renewable energy to 42.5% by 2030, driving demand for solar modules. However, the increase in the cost of modules is not affecting the capital expenditure of building a solar project just yet. As a percentage of the all-in, fully installed system cost, the jump in prices of solar modules represents only about 1% to 2%. The Chinese supplier said that slimmer margins have manufacturers concerned, especially if customers compel them to cover freight to project sites. The margins had already depleted due to historically low prices. Because the cost of modules has fallen significantly, the additional cost is being absorbed without any issues. Two weeks of additional transit time must be built into the supply chain and inventories. Suppliers said they hope that this is a short-term situation that will be resolved. If not, they will have to explore the long-term viability of alternative routes and a comparative increase in shipping prices.

Next Story
Real Estate

Centre proposes digital property law to modernise registrations

In a landmark move to modernise India’s property registration system, the Central Government has released the draft Registration Bill, 2025, which seeks to replace the 117-year-old Registration Act of 1908. The proposed legislation introduces a fully digital, paperless, and citizen-centric framework for registering immovable property — a first for India’s real estate sector. Prepared by the Department of Land Resources under the Ministry of Rural Development, the draft bill proposes key changes such as online submission and registration of documents, electronic admission and verific..

Next Story
Infrastructure Transport

GMDA Approved to Cut 1,300 Trees for Gurugram Metro Construction

The Gurugram Metropolitan Development Authority (GMDA) has obtained approval to fell 1,300 trees between Millennium City Centre and Hero Honda Chowk for the Gurugram Metro project, officials stated on Monday.A senior GMDA official mentioned that the forest department had granted clearance the previous week. The official explained that permission had been received to cut down 1,300 trees, while approval for felling an additional 500 trees on the stretch from Hero Honda Chowk to Sector 9 was expected soon. They added that the modalities for tree felling would be coordinated with Gurugram Metro R..

Next Story
Infrastructure Transport

PIB Clears East-West Corridor for Lucknow Metro Project

The Public Investment Board (PIB) has granted approval for the East-West Corridor of the Lucknow Metro, with an estimated project cost of ₹5,801 crore. This corridor, part of Phase 1B of the metro project, will cover a distance of 11.165 km, stretching between Charbagh and Vasantkunj.The decision was made during a PIB meeting held in Delhi in the first week of May, which was chaired by the Union Finance Secretary. The approval followed the clearance of the detailed project report (DPR) by the Uttar Pradesh government in March 2024. Subsequently, the Network Planning Group (NPG) provided the ..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?