Supply chain cost increases see solar stocks underperforming – pv magazine international


From pv magazine 06/2021

Stock market index 6/21Until May 25, the Invesco Solar ETF – an exchange-traded fund that tracks the MAC Global Solar Energy Index – underperformed the S&P 500 and the Dow Jones Industrial. The Invesco Solar ETF (TAN) fell 6.4%, while the S&P 500 and DJIA rose 0.4% and 1.5%, respectively.

The five solar stocks in the US market that posted the biggest losses include Applied Materials (1.4%), Enphase Energy (1.2%), SolarEdge Technologies (-3.3%), Atlantica Sustainable Infrastructure (4.1 %) and Generac Holdings (-4.1%). The most pressing challenge for the solar PV industry is undoubtedly the increase in costs along the supply chain, but none is more highlighted than the increase in raw material costs, in particular. especially steel and freight costs.

US steel prices are expected to remain high in the first two quarters of 2022. US manufacturers do not appear to be in a rush to increase production. Factors contributing to the price increases include the consolidation of US steel mills and tariffs on steel imports. Steel imports have led to increased utilization of US steel mills (now reported at 85%) and with a drop in suppliers due to consolidation, producers are able to maintain their “grip” on supply. and keep prices high through the first half of 2022. Overall, price increases and a higher cost of capital added $ 0.05 / W in incremental costs.

Entrance costs

Solar tracker manufacturers such as Array (ARRY) and FTC Solar (FTCI) have seen major impacts on their stock prices (down around 50% and around 40% on May 12, respectively) over the course of the results season for the week of May 10. Again, this was directly attributable to cost inflation. For reference, the price of large-scale PV modules in the United States six months ago for the third quarter of 2020 was $ 0.25 / W, compared to $ 0.28 / W today. With mid-teens IRRs for large-scale projects, these companies don’t have much room to absorb this rapidly rising cost inflation.

By Jesse Pichel

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