War in Ukraine: supply chains problems, logistics and financial crises 2022 — review from Uss-Express
The Russian invasion of Ukraine has caused problems to the global economy. If you look at the map of airspace, you’ll see air supply chains have changed because the EU has closed its space for Russian aircraft couriers. But this isn’t the only shift. In this Uss Express review, our experts will briefly tell you what is going to happen with supply chains and many industries if the Russian invasion continues.
Global logistics trends
Over 250 international bands have already left Russia. They considered staying in Russia unacceptable from the point of view of the strategic reputation development. Most reputable international delivery companies have supported this trend.
For instance, Maersk, which together with other operators controls 58% of the industry in the country, has already stopped accepting new orders for shipping cargo from and in the country. This case when the management of the largest operators refuses to deal with specific supply chains is impacting the costs of raw materials produced in Russia.
Maersk isn’t the only operator that decided to leave Russia. The others are the following:
- Mediterranean Shipping Company (MSC)
- CMA CGM
- Ocean Network Express (ONE)
- Yang Ming
Despite the drawbacks, this crisis may be beneficial for many businesses leaving Russia. As Sam New suggests:
“This is a learning experience, and risk management, building up network resiliency and business continuity management are not just a necessary exercise. If done properly, they can be a source of competitive advantage for an organization.”
Inflation and financial crises caused by war
Global businesses have been suffering inflation and financial crises since the outbreak of the COVID-19 pandemic. Current financial problems of the companies and supply chains aren’t less significant.
The challenges already affect the industry of automobile vehicle manufacturing. The majority of the world’s largest automakers have left the Russian market and stopped manufacturing their cars there. Russia and Ukraine countries are the main suppliers of such metals as nickel, copper and iron. Since manufacturing in Ukraine is almost impossible due to military activities, and in Russia due to sanctions, the costs for metals have dramatically increased. For instance, the prices for nickel, used for making batteries for vehicles, have surged from $30,000 up to $100,000 per ton.
Challenges for supply chains are also caused by the increase in prices for natural gas and crude oil. Around 40% of these resources were imported to Europe from Russia, but today this becomes a problem. The USA and UK have already banned the import of Russian energy resources. Their sanctions also contributed to the surge of the costs for crude oil from around $80 to over $103 per barrel.
The technological industry is also being affected. 80% of all world’s platinum used for making microchips is produced in Russia. 90% of the world’s neon is supplied by Ukraine, but the Russian invasion made the export of neon almost impossible. This has made the price of neon surge from $290 up to $2,500 per square metre.
Finally, Russia was the major supplier of nitrogen fertilizers to India. As a response to the sanctions, Russia stopped the export of fertilizers abroad, which forced India to look for other suppliers, including Canada and Israel. Throughout the previous year, the prices have increased from around $468 to $837 per ton, and further growth is expected to be the same (if not worse).
War leading to potential food crises
The economic share of Russia and Ukraine in supplies of wheat and corn amounts to 25% and 20% relatively. If you look at the war map, you’ll see that many territories of Ukraine where the agricultural products are produced suffer from military activities, so around 30% of agricultural entities have completely stopped their activity and 45% of them decreased their production. This has already led to the increase of wheat prices from $286 to over $350 per metric ton.
Such volatile price rates for agricultural products and the impossibility to export them may make these products the same deficient in Africa as water.
What do we have today?
- The prices for gas and oil have increased.
- Operators have left Russia and frozen many supply chains.
- Some critical products might become deficient.
- The supply of microchips faces challenges.
To sum it up, here is how the experts of the Uss-Express eCommerce estimate the change in price rates:
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