Photovoltaic supply chain warning: Strait blockade leads to aluminum material shortage, module frame costs may rise.

Two months have passed since the Strait of Hormuz was closed due to the outbreak of the Middle East conflict. With no clear indication of when the strait will be safely reopened for shipping, its ripple effects on the global energy industry are intensifying.

While the strait closure has had the most significant impact on the oil and gas industry (a situation that may prompt a rebound in new global photovoltaic (PV) installations), the PV system supply chain has also been affected, with noticeable disruptions.

Since China accounts for a large portion of global PV production capacity, the supply of core solar panels such as polysilicon and silicon wafers has been relatively minimally affected by the Middle East conflict. However, the situation is quite different for other components, such as aluminum-based module frames and PV glass produced using methanol. Data from market intelligence provider Mysteel shows that Iran is the world's second-largest methanol producer and China's largest methanol supplier.

“Shortages are emerging, aren’t they?” said John Mitchell, president and CEO of the global electronics association (GEA). “We’re facing copper shortages, aluminum shortages, and supply disruptions in all kinds of raw materials. Starting up new mines is not only costly but also extremely time-consuming. We can’t simply say, ‘Oh, we’re experiencing a shortage, let’s start up that mine in country X now,’ that kind of solution simply can’t be implemented quickly.” Although the Middle East is not a major aluminum producer—according to ING, the region accounts for about 9% of global aluminum production—a disruption to the aluminum supply chain will still have a ripple effect on the global market, impacting supply patterns and product pricing, and potentially driving up the cost of module frames, which are primarily made from aluminum.

However, the industry is not without options. If the situation in the Straits Times worsens and continues to put pressure on aluminum supply and prices, companies may need to not only find new sources of aluminum but also explore alternative solutions, such as using steel to manufacture module frames.

Mitchell explained, “The longer this situation persists, the more proactive companies will be in seeking new sources of raw materials and strengthening other supply channels.” He added that the longer it takes for the Strait of Hormuz to be cleared and reopened, the higher the likelihood that companies will eventually diversify their raw material sourcing from different regions.

Solar Demand May Further Exacerbate Raw Material Shortages

If raw material shortages and rising prices are already troubling enough, the ripple effect of higher oil and gas prices—namely, increased interest in photovoltaic modules—poses another challenge.

According to data from UK energy supplier Octopus Energy, solar installation inquiries in the UK increased by 27% between late February and March. Meanwhile, the UK government has prioritized solar power generation to promote energy security, including accelerating the approval of plug-and-play solar (also known as balcony solar) products for sale in the UK market.

Mitchell revealed that increased market interest in photovoltaic modules will further exacerbate the pressure of raw material shortages.

“As this demand grows, raw material supply constraints will become more apparent,” Mitchell stated. He added that these constraints will not only affect the solar industry but also other industries that rely on these raw materials, especially given the ongoing AI boom.

“This is why the cost of other electronics is rising—because the AI ​​sector is willing to pay higher prices for components like memory. All these dynamics are propagating throughout the industry ecosystem, making the current environment quite challenging. The solar industry is being impacted by the AI ​​industry, which in turn is constrained by energy shortages; it’s all interconnected.”

“Electronics have permeated every aspect of our lives. The electronics industry’s ecosystem, or supply chain, is perhaps one of the most complex in the world, if not the most complex—because no single country can manufacture electronics independently without the support of other regions.”

“Every ripple in the pond disrupts this extremely fragile and highly interconnected supply chain.”

Defending against Supply Chain Disruptions with “Strategic Interdependence”

He added that one of GEA’s core areas of work is enhancing supply chain resilience, a model they call “strategic interdependence.” When supply chain disruptions of the scale of the current strait blockade occur (such as the COVID-19 pandemic in 2020 and the Russia-Ukraine conflict in 2022), companies need to prepare in advance and have diversified response options to effectively mitigate risks.

“You need to have multiple supply options,” Mitchell said. “Too many options reduce operational efficiency, while too few options concentrate risk too much. Therefore, you need to have some local suppliers, some suppliers in neighboring regions, and some low-cost suppliers, and keep these channels running smoothly. If you can establish strong strategic interdependencies, companies can weather supply chain crises more efficiently.”

He also mentioned another solution—developing a circular economy by improving material recycling efficiency. Mitchell stated that the trade organization has been advocating for this for decades. Although it is considered a long-term solution, the solar industry has been working to build the circularity that Mitchell emphasized, and several recycling companies are currently developing related technologies to maximize the recycling of various components of photovoltaic modules.

Mitchell stressed the importance of recycling key components such as aluminum, pointing out that recycling and reuse can significantly reduce energy consumption compared to mining and producing aluminum from scratch.