A summer wheat harvest in Chernihiv, Ukraine, on Thursday, August 10, 2017.
Vincent Mundy | Bloomberg | beautiful pictures
Oil and gas price will spike further as the Russia-Ukraine crisis escalates, but impact on energy will not be the only division.
From wheat to barley, and copper to nickel, analysts told CNBC that supply chains could be disrupted as the crisis takes a turn for the worse.
Alan Holland, CEO and founder at sourcing technology company Keelvar said Ukraine is considered the “cradle of Europe” and an invasion would result in the food supply chain being disrupted. severely affected”.
Russia and Ukraine are also major suppliers of metals and commodities, analysts say.
Tensions between Russia and Ukraine have increased in the past few days when President Vladimir Putin ordered Kremlin forces to enter two pro-Russian separatist regions in eastern Ukraine. It came after he said that Russia would officially recognize the independence of Donetsk and Luhansk.
Food safety
Ukraine produces the wheat, barley and rye that much of Europe depends on, analysts say. It is also a major producer of corn.
“Although the harvest season is still a few months away, prolonged conflict will cause bread shortages [and increase consumer prices] this fall,” said Holland.
Ukraine’s currency has begun to depreciate since Russian troops began massing on the border. This will increase their export costs.
Dawn Tiura
President, Sourcing Industry Corporation
In fact, it’s not just the European Union that will be affected – many countries in the Middle East and Africa also rely on Ukraine’s wheat and corn, and that supply disruption could affect food security. in those regions, said Dawn Tiura, president of Sourcing Industry Group.
“China is also a big recipient of Ukraine’s corn – in fact, Ukraine has already replaced the US as China’s top corn supplier by 2021,” she said.
Wheat and corn prices have skyrocketed. Chicago wheat futures are up about 12 percent since the start of the year, while corn futures are up 14.5 percent in the same period.
Food inflation is on the rise and could get worse if armed conflict breaks out.
Per Hong, senior partner at consulting firm Kearney, said: “The rise in food prices will only be exacerbated by an additional price shock, especially if the core agricultural areas in Ukraine are dominated by middlemen. citadel with Russia to occupy”.
Metals and raw materials
According to Tiura, Ukraine has steadily increased its exports over the years and is now a “huge supplier” of raw materials, chemical products and even machinery such as transport equipment.
It is also a major supplier of minerals and other commodities, analysts say.
“Ukraine’s currency started to depreciate since Russian troops started to gather on the border. This will increase the cost of their exports,” Tiura added.
Russia also controls about 10% of global copper reserves and is a major producer of nickel and platinum, according to Hong.
Nickel is an important raw material used in electric vehicle batteries, and copper – seen by many as an economic fastener – is widely used in electronics manufacturing and home construction.
“The US chip industry is heavily dependent on neon lights sourced from Ukraine, and Russia also exports a number of key elements for the production of semiconductors, jet engines, automobiles, and semiconductors,” said Hong. medicine.
Impact on Germany
While most of the European Union will be affected by the escalating crisis, Germany will be particularly hard hit.
Atul Vashistha, President and CEO of supply chain risk intelligence firm Supply Wisdom, said Germany gets most of its energy needs for manufacturing and electricity from natural gas it gets from Russia. .
He told CNBC in An email.
Top exports from Germany include automobiles and auto parts, other transport equipment, electronics, metals and plastics.
