Solar Manufacturers In India Brace For Impact As Shortages Start, ALMM Announcement Provides Support
In an interesting twist today, news of a sharp drop in Borosil Limited (as opposed to it’s green cousin, Borosil Renewables Limted) shares due to shortage of LPG for plant operations was accompanied by a sharp rise in green energy shares. The rise might have been influenced by the announcement of ALMM 3, from June 2028, a step that is widely expected to support larger manufactirers with the resoyurces and ability to make the transition in time. Doing so will mean higher margins for a period as others catch up, as we are seeing with cell manufacturing right now.
The market is clearly trying to find a balance between short term pain versus these long term prospects, which are improving considerably for the green energy sector in India. But long term here could mean anything between 6 months to 2 years, depending on when the Iran conflict ends. The oil price rise is already hurting other sectors, and the solar manufacturing sectror is certainly not immune.
Manufacturers Beginning To Feel The Pain
For now, solar manufacturers we spoke to expressed deep apprehensions about the next quarter’s performance, linked to both shortage of gases and other raw materials. These raw materials include Aluminium, besides of course cells and wafers. The issue has been exacerbated by a complete halt in produiction at smaller suppliers in the chain, who have been unablke to arrange workarounds for the cut backs in gas allocation.
While refusing to go on record, a manufacturer we spoke to said that ” Right now we are in fire fighting mode to execute our pending orders- material availability + cost both serious issues now”. Confirming the disruptions at their own suppliers end, he went on to warn that another two weeks of the conflict would have longer term disruptions than many people imagine.
Two other manufacturers we spoke to refused to get into specifics of their inventory situation, mainly expressing hope that the conflict would end sooner than later. All three agreed that elevated oil prices will have an impact on costs immdiately, as firms in the sector typically keep inventories for 30-45 days of production at most. That could mean higher prices for the new orders, as and when they can be placed for delivery.
The stock markets seem to be ignoring these geopolitical energy risks, as the markets, and the green pack in particular rose sharply today. Or maybe its simply a case of adjusting prices that have been beaten down too far. While many market observers have expresed reservations in the absense of any clear indicator, some have been called it a dead cat bounce. Others added the caveat that we will never quite know when the bounce turns into something more sustainable, as news can change quickly.
Cell Manufacturing and Polymers/Encapsulants To Be Worst Hit
But most agreed with the two week prognosis, adding that restarting, or renewing full production will definitely take time, stretching from a week to a month depending on the firm. Cell manufacturing will be particularly sensitive at some stage soon, as that process requires use of many more gases that are derived from natural gas.
Speciality gases like Ammonia, silane, phosphine, and hydrogen all depend on natural gas as their primary feedstock. A Gulf conflict that disrupts LNG imports would spike natural gas prices in India, raising the production cost of these gases dramatically — squeezing margins for solar cell fabs.
Solar panels also require EVA (ethylene-vinyl acetate) encapsulants, backsheets, and junction boxes — all petrochemical derivatives. Higher crude prices will mean higher costs here as well, which will disrupt planning and delivery across the board soon.