23 Apr 2021
A recent article published by The Economic Times titled “Indian solar companies on edge as Chinese vendors exit deals” reported that “Leading solar module suppliers from China including Longi Solar and Jinko Solar are backing out of signed contracts with Indian power developers, citing rising commodity prices, said people aware of the matter.” This report inferred that LONGi unilaterally terminated contracts with our customers, which is factually incorrect.
LONGi would like to clarify that no contracts signed with developers in India have been terminated. Module price increase was necessary due to price hikes in the raw materials used in manufacturing. LONGi engaged with every developer to renegotiate terms of the contracts, always with an intent to find “win-win” position for both parties. With modules making up 55-60% of project CAPEX in a highly competitive market like India, LONGi recognizes that independent power producers (IPPs) have thin margins. LONGi has accepted negative margins and losses to bridge the price gap so our customers can realize their planned projects on schedule.
Raw material prices are driven by many factors which are not in control of OEMs like LONGi. The PV industry has experienced several rounds of raw material price increases since the second half of 2020 - from polysilicon to materials such as PV glass and silver paste. Between June 2020 and February 2021, glass prices surged by around 80% per square meter. Prices for polysilicon and silver also skyrocketed by 64% and 55%, respectively. Silver is mainly used in manufacturing silver paste for solar cell metallization. Overall module cost has increased about 35% and has remained high, due to the sharp price increases in these raw materials. All panel manufacturers are unable to fully absorb the steep rise in upstream cost.
Meanwhile, freight rates have also increased substantially due to a shortage of shipping capacity under COVID-19 regulations for the crew, pushing up module prices further.
“Our clients, which are leading IPPs in India and worldwide, are fully aware of the price increases in raw materials and freight cost. It is a difficult situation and beyond any of our control. It is in this scenario that LONGi and our partners mutually renegotiated the price terms in supply contracts to ensure on time project completion. We are happy to announce that we have been able to successfully fulfill almost all our clients’ orders and made deliveries on time. There has been no instance of unilateral contract termination whatsoever. In fact, LONGi, being a vertically integrated player, was able to minimise the price impact for our clients as much as possible by realizing negative margins on the delivery of modules,” says Mr. Dennis She, Senior Vice President, LONGi Solar.
LONGi has strong, long-standing relationships with both large and small IPPs in India. The company has signed large, strategic contracts with several leading solar power developers and continues to deliver successfully on its commitments.
LONGi is committed to supporting the Government of India’s mission to promote domestic production of solar equipment. The company has been comprehensively assessing setting up a production base in India and preliminary preparations are already completed. It already acquired land in India to set up local manufacturing operations.
“India has always been a market we have paid great attention to. We hope to offer high-efficiency monocrystalline photovoltaic (PV) products in India on a large scale as well as support the government’s policy of domestic manufacturing. In 2020, we brought over 1.5 GW PV products to India, and in 2021, we have already supplied 1 GW till date, which has been praised and trusted by Indian customers,” She added.
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