3 Commodities that will be hit by the Russia – Ukraine war
Ukraine and Russia count for a small amount of the Imports as compared to other nations in the Supply Chain. But, are highly essential when it comes to energy and raw materials for many crucial supply chain routes.
The crisis between Ukraine and Russia shows how economies and lives worldwide are interconnected and a crisis, like war, would result in catastrophic impacts globally. Here are 3 commodities that may be impacted during these troubled times.
- Ukraine and Russia account for over a quarter of the world’s wheat exports. Also, known is Ukraine being the key and major exporter of Sunflower oil, globally. When a war-torn country abrupts or fails to harvest, process and export products as essentials as this, suppliers will find it near impossible to replace the same thus creating a spike in demand, drop in supply and hike in prices. Sunflower oil, wheat and similar produce are raw materials to various products and key-part of the various industries from FMCG, F&B, QSR and more. Turkey, Egypt and other countries reply on Wheat Exports from Ukraine; a workaround to this would be other countries like India step up production to cater to the global demands.
- The recent pandemic hit global gas reserves due to workforce shortage. Russia’s gas flows may not be interrupted right away, but if the war continues many countries would have to stop exporting and importing from Russia, thus leading to a shortage in supply. This commodity being fundamental in multiple supply chains, a shortage of the same would halt many industries globally. As seen during the gas price hike during the pandemic, impacted fertiliser companies reduced the global carbon dioxide supply that is essential for medical procedures, anti-rooms and more.
- Russia and Ukraine are the leaders in the production of metals like Copper, Nickle and Iron. If sanctions are imposed on Russia and exports, logistics and manufacturing plants are interrupted in Ukraine, a global shortage is imminent. Neon, palladium, platinum and titanium are other metals that are manufactured and imported from these countries. Palladium is a fundamental raw material from the dental industry to mobile phones, thus a drop in supply will lead to severe global disruptions. Titanium is a core material in the aerospace industry and reports already indicate Airbus and Boeing approaching other suppliers for their titanium and other metal needs. But with these demands increasing, prices will skyrocket for the raw materials. Aerospace industry price deviation would result in all commodity price inflation apart from passenger travel.
Alternative sources will be required, even though many countries sign long-term payment upfront deals with these countries. Certain impacts can be curbed when other countries can step-up production and exports thus dampening the impact on the global demand crisis.