Impact of Russia-Ukraine on supply chains: food, metals, commodities
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Summer wheat harvest at Chernihiv in Ukraine on Thursday Aug. 10, 2017.
Getty Images| Bloomberg | Getty Images
Petroleum and gas pricesThe Russian-Ukraine Crisis is likely to cause further inflation, however the impact on energyIt’s not the only one.
CNBC’s analysts have told CNBC that as crisis turns sour, supply chains will be affected in all areas, from wheat to barley to copper and nickel to tonic.
Ukraine is known as the “breadbasket Europe” and an invasion of Ukraine would cause a disruption to Europe’s food supply chain, according to Alan Holland CEO and founder of Keelvar, the sourcing technology company Keelvar.
Analysts said that Russia and Ukraine were also major suppliers of metals.
In the last few days, tensions between Russia and Ukraine have reached fever pitch President Vladimir Putin ordered the Kremlin’s forces into two pro-Russian separatist regions in eastern Ukraine. After he stated that Russia would recognize Donetsk/Luhansk independence, it happened.
Security of food
Analysts said that Ukraine is a major producer of wheat, barley, and rye, which much of Europe depends on. Also, it is a large producer of corn.
Although harvesting season may still be a while away, an extended conflict could lead to bread shortages [and increase consumer prices]Holland said that this was the fall.
The Russian troops began gathering near the Ukrainian border and Ukraine’s currency started to lose value. It will also increase their export costs.
Dawn Tiura
president, Sourcing Industry Group
In fact, it’s not just the European Union that will be hit — many nations in the Middle East and Africa also rely on Ukranian wheat and corn, and disruptions to that supply could affect food security in those regions, said Dawn Tiura, president at Sourcing Industry Group.
“China is also a big recipient of Ukrainian corn — in fact, Ukraine replaced the U.S. as China’s top corn supplier in 2021,” she said.
Prices for wheat and corn were both already on the rise. Chicago’s wheat futures rose by about 12 percent since January, and corn futures soared by 14.5%.
There has been an increase in food inflation. This could be worsened if there is an armed conflict.
“Rising food prices would only be exacerbated with additional price shocks, especially if core agricultural areas in Ukraine are seized by Russian loyalists,” said Per Hong, senior partner at consulting firm Kearney.
Raw materials and metals
Tiura says that Ukraine has seen a steady increase in its exports throughout the years. It is now considered a major supplier of raw materials, chemicals, and equipment like transport equipment.
Analysts say it’s also an important supplier of minerals, and other commodities.
Since Russian soldiers began to gather at the border, Ukraine’s currency has been declining in value. Tiura said that this will raise the price of their exports.
Hong also estimates that Russia controls around 10% of the global copper resources and is a leading producer of nickel, platinum and other metals.
Nickel is a key raw material used in electric vehicle batteries, and copper — widely seen as an economic bellwether — is extensively used in electronics manufacturing and construction of homes.
“The U.S. chip industry heavily relies on Ukrainian-sourced neon and Russia also exports a number of elements critical to the manufacturing of semiconductors, jet engines, automobiles and medicine,” Hong said.
Germany’s Impact
Although most European Union members would feel the effects of this escalating crisis on their entire continent, Germany would suffer the worst.
Atul Vashistha (CEO and chairman of Supply Wisdom), stated that Germany gets most of its electricity and manufacturing energy from Russia.
It will hinder manufacturing in Germany if tensions keep rising and there is a rise in disruptions caused by a war or sanctions. He stated that factories would have to reduce production, which could lead to other manufacturing countries,” in an email to CNBC.
The top German exports include automobiles and parts for autos, as well as other equipment such electronics and metals.
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