As the military war between Russia and Ukraine, it threatens to disrupt the global supply system, which is still recuperating from the COVID-19 pandemic's impact. As Russia bears the brunt of the sanctions imposed by Western nations for Ukraine's invasion, including the exclusion of many Russian banks from the interbank payments system SWIFT, the ongoing conflict has the potential to harm industries that rely on Russia for raw materials, particularly industrial commodities
All of this is likely to lead to another wave of shortages in a globe still reeling from the effects of the pandemic. It may also result in price increases at a time when inflation is a big worry for countries all over the world, affecting sectors and families in general. Let us look at some of the places that are likely to be affected by the current conflict:
Many European countries rely heavily on Russian energy, particularly gas, which is delivered via numerous critical pipelines. Even if the situation is resolved, it is possible that the heavy economic penalties imposed on Russia will make it difficult for these countries to buy gas.
Because of the pandemic, global gas sources are exhausted, and energy prices are already skyrocketing, affecting consumers and businesses. Because gas is a critical input in many supply chains, disruptions in such a fundamental supply will have far-reaching economic implications.
Ukraine also contains the second-largest known gas reserves in Europe, after Russia's gas deposits in Asia, albeit these are largely untapped. Furthermore, the battle may impair Russia's crude oil output in a market where supply is already underperforming demand, causing prices to climb even further. This will affect not only the car industry, but all major businesses as their input costs rise. Brent crude futures were trading 4.3 percent higher at $102.14 a barrel on Monday.
Transport
With global transportation already severely hampered as a result of the pandemic, the war is expected to exacerbate the situation. Ocean shipping and rail freight are two types of transportation that are likely to be affected. While rail only transports a small part of overall freight between Asia and Europe, it has been critical during recent transportation bottlenecks and is steadily rising. Sanctions in Russia are expected to have a significant impact on rail traffic in countries such as Lithuania.
Even before the invasion, ship owners began to shun Black Sea commerce routes, and insurance companies requested advance notice of any such excursions. Although container shipping in BlackSea is a relatively small business on a worldwide basis, Odessa has one of the major container facilities.
Russian force to cut this off, the impact on Ukrainian imports and exports might be significant, with potentially dire humanitarian repercussions. Rising oil prices as a result of the war are a source of concern for shipping in general. Freight charges are currently exceedingly high and are expected to grow considerably further. There's also concern that cyber-attacks would target global supply lines.
Because trade is heavily reliant on internet information exchange, targeting vital shipping lines or infrastructure might have far-reaching implications. A supply chain cyber-attack can have far-reaching consequences.
In addition to the battle, numerous countries are limiting their airspace to Russian-registered planes. This is likely to have a global impact on the aviation industry.
Edible oil
Ukraine accounts for nearly half of sunflower oil exports. Importers will struggle to replace supply if harvesting and processing are hampered in a war-torn Ukraine, or if exports are halted.
With the acute potential of supply disruptions, enterprises in India have few options but to contemplate raising the prices of daily-consumed edible oils within weeks. According to the country's main edible oil manufacturers, imports meet more than 70% of India'scrude edible oil demand. The proportion is even higher for sunflower oil.
According to the news report, around 3,80,000 tons of sunflower oil exports from the Black Sea region to India are blocked at ports and with producers, while new purchases have stalled after ports suspended operations following Russia's invasion of Ukraine.
"Russia and Ukraine account for 90% of the world's sunflower oil demand." Our country's reliance on sunflower oil is approximately 15% of all oils. Things will return to normal if the situation returns to normal within 7-10 days, soil importers have an inventory of up to 45 days.
However, if thecrisis continues, with oil factories remaining closed and no vessels available, we may experience some scarcity in April "Angshu Mallick, Chief ExecutiveOfficer and Managing Director of Adani Wilmar, the country's largest edible oil company, told Business Today.
Marico Ltd., which markets the popular Saffola brand of edible oils, is already planning cost-cutting steps to keep price increases under check.
According to the company's MD and CEO, Saugata Gupta, the evolving geopolitical scenario" may cause crude oil and other commodity prices to rise even further, having a knock-on effect for raw materials and packing materials
Metals
Russia and Ukraineare the world's largest producers of metals such as nickel, copper, and iron. They are also heavily involved in the export and production of other critical raw minerals such as neon, palladium, and platinum. The price of certain metals has risen as a result of Russia's sanctions.
Nickel and copper costs, which are utilized in manufacturing and construction, have also been rising. The aerospace sectors of the United States, Europe, and the United Kingdom all rely on Russian titanium supplies. Boeing and Airbus have already explored potential replacement suppliers. However, the market dominance and product portfolio of top Russian supplier VSMPO-AVISTA make full diversification hard, with certain aircraft manufacturers having signedlong-term supply contracts through 2028.
Disruptions and potential shortages are to be expected for all of these commodities, threatening to raise costs for a wide range of products and services.
White goods
Apart from general inflation, white goods such as air conditioners and refrigerators are likely to suffer price increases due to increases in copper, aluminum, steel, and plastic costs.
In India, companies such as Godrej Appliances, Usha International, and TV manufacturerSuperplastronics have urged consumers to postpone purchases if they wish to save money.
According to EricBraganza, President of the Consumer Electronics and Appliances ManufacturersAssociation (CEAMA), "The sector already saw a price increase at the beginning of January, and we anticipate a 5% increase this quarter owing to rising commodity inflation. Since the initial outbreak of COVID-19, global freight rates have been rising. Freight charges that are exorbitant have the potential to harm both consumers and the industry."
Microchips
The year 2021 was all about microchip shortages, as the pandemic disrupted supply lines and caused a dramatic increase in demand for electronic products. While many observers predicted that the situation would begin to improve in 2022, the Russia-Ukraine conflict has dampened that confidence.
Russia and Ukraine are major exporters of neon, palladium, and platinum, all of which are essential for microprocessor manufacturing. About 90% of the neon used in chip lithography comes from Russia, and 60% of it is cleaned by a single business in Odessa. The sanctions imposed on Russia will have a negative impact on the economy.
Alternative energysources will necessitate long-term investments. Chip manufacturers currently stockpile two to four weeks' worth of extra inventory, but any extended supply disruption caused by military action will have a significant impact on the production of semiconductors and products that rely on them.
Auto
The war is predicted to have a significant impact on the automobile industry. The rise in oilprices, as well as the persistent scarcity of semiconductors and chips, as well as other rare-earth metals, are anticipated to exacerbate the industry troubles. Furthermore, Ukraine is home to a large number of enterprises that manufacture automotive components for automakers.
According to TheWall Street Journal, Leoni AG, which supplies wire systems built-in Ukraine to European automakers, has closed its two operations in Ukraine. As a result, Volkswagen AG was forced to close one of its German plants.
Food security
Global food prices surged dramatically in 2021, owing to a variety of factors ranging from higher energy prices to climate change. Food producers are likely to face additional pressure as major input prices rise. Russia and Ukraine account for about a quarter of worldwide wheat exports.
Some countries rely heavily on food from Russia and Ukraine. Turkey and Egypt, for example, rely on them for about 70% of their wheat imports. Ukraine is also China's largest corn supplier. Increased production in other parts of the world could assist to mitigate the impact of food supply disruptions. However, because Russia is a major source of critical fertilizer ingredients, trade sanctions could have an impact on production.
Much of Ukraine'sgrain and wheat are intended for Africa and West Asia, which depend substantially on food imports. Over half of Ukraine's annual grain and wheat shipments are earmarked for Africa or the Middle East.
If Ukraine's exports are interrupted, the largest concern is global food security. Meanwhile, due to distance, US wheat accounts for less than 10% of what is sent to those countries. Ukraine is expecting to finish third in wheat and fourth in corn this year, but the ranking could slip due to the Russian situation.
