Russia-Ukraine conflict: what are the impacts on the Brazilian solar energy market?

The war scenario created by the attacks by Russian troops on Ukraine has generated concern in the international community. The countries clashed in the early hours of the morning (Brasília time) this Thursday (24), after weeks of tension.

Amid the uncertainties of what could happen ahead, professionals in the solar sector, heard by Solar Channel, highlight that – despite the upward trend in the dollar, fuel prices and inflation – it is still too early to speculate on the impacts that the conflict in Eastern Europe could have on the Brazilian market.

Gustavo Tegon, co-founder of Solar Sphere, explains that there are still many uncertainties about the real impact caused by Russia's attack on Ukraine.

“There is concern in the solar energy sector about the spike in exchange rates and also about imports from China, as we still don’t know what the Chinese government’s position will be in relation to these attacks,” he commented.

The executive highlighted that another global conflict also worries the market: the possibility of China taking over Taiwan, which, in Tegon's assessment, would cause an almost immediate impact on the segment. “We have to stay aware of possible war movements between Russia and Ukraine and China and Taiwan,” he highlighted.

Desheng Lei, sales director at Solis, believes that the conflict could be favorable for the solar market, because, in his view, “chemical energy will increase in price, like gasoline. Thus, the solar system will be more competitive in the global market”, he assumes.  

How is the dollar?

After the Russian invasion, the dollar rose and closed Thursday at R$ 5.10 – an increase of 2.02%, the biggest daily percentage increase in more than five months. On Friday (25), the rise of the American currency continued, reaching the level of R$ 5.17 close to the stock exchange closing time. 

José Augusto Ruas, economist and professor at FACAMP (Faculdades de Campinas), explains that when there is international turbulence, there is almost always a market flight towards the dollar.

In other words, a tendency for the North American currency to appreciate, while the others depreciate. “This is actually a historical trend, which we call a flight to liquidity at times when expectations become more tense”, he explained.

On the other hand, the economist believes that the appreciation of the Dollar should occur for a short period of time, precisely because, in his view, the conflict should be resolved quickly. “It seems to me that Russia has imposed itself, as could be imagined from a military point of view, and that the offensive will be brief”, he commented. 

“In this sense, macroeconomic consequences tend to be more speculative than effective and lasting. It is very likely that there will be some speculation in the dollar for a few days, but, as soon as the confrontation is effectively resolved, the devaluation of this currency should return”, he stressed. 

Price of a barrel of oil breaks record

Another impact caused by the Russian invasion occurred on oil prices, which surpassed the US$ 100 barrier on Thursday for the first time since 2014. 

On the same day, the president of Petrobras, Joaquim Silva e Luna, said that the international scenario after Russia's invasion of Ukraine is still full of uncertainty and volatility for the definition of possible readjustments of fuels in the company's refineries.

“We are living in a time of peak volatility and extreme uncertainty. In this scenario, we will continue to observe minute by minute”, he declared. 

Earlier, in a conference call with analysts, the director of Marketing and Logistics at Petrobras, Cláudio Mastella, reaffirmed the maintenance of the PPI (Import Parity Price), even with the crisis. 

The argument is that, if it does not follow the prices of oil and derivatives, the Brazilian fuel market and internal supply could be compromised. 

Mastella, however, highlighted that the state-owned company evaluates the impacts of the high volatility of oil prices on the international market, before making any decision on prices. 

He also explained that the devaluation of the dollar against the Real has allowed the company to keep the average values of gasoline and diesel unchanged in its refineries since the beginning of the year. 

Equipment shipping

The Russian attack on Ukraine also caused freight rates to rise initially, as oil buyers struggled to find shippers willing to send their ships to Russian ports because of bombings in and around Ukraine. 

The fee to reserve an Aframax vessel to load at one of Russia's Baltic Sea ports for Western Europe, for example, nearly tripled on Thursday from the previous day, according to traders and shipbrokers. 

In China, some traders also stopped trading in Russian barrels amid American sanctions, announced by US President Joe Biden on the Soviet country.

Despite this, José Augusto Ruas stated that freight and the global macroeconomy should not be affected in the medium and long term. “It is possible that one or another issue will be affected, mainly by Ukraine being a supplier of steel and other inputs in the European system. But, I don’t believe there will be a big change, for example, in the price of international freight,” he said. 

For the economist, it is most likely that production and issues involving the Ukrainian economy will resume in a relatively short period of time. “I believe that the effect is very low, precisely because of the small speed of the conflict (…) I do not believe that we should have a significant impact on the global macroeconomy”, he reinforced.

What about the energy sector? How is it? 

Regarding the energy sector, the economist said that, unlike other previous segments, this will be a sector with consequences. “This diplomatic tension created between Europe and Russia may have some further ramifications, even after the conflict is resolved,” he said. 

“If I had to make a bet, I would say that energy prices, especially natural gas and energy in Europe, should remain a little higher for a little longer period. This will certainly have some kind of global consequence. In Brazil, this impact should affect fuel inflation”, he highlighted.