Five Industries Certain to be Affected by the Conflict in Ukraine

As we continue to monitor the escalating conflict between Russia and Ukraine, the disruptions in regional and global supply chains are inevitable. Companies with suppliers in the region will, most likely, have supply chain challenges to overcome. 

Here are the five areas most likely to be affected by the conflict:

1. Energy

Russia accounts for about a fifth of the global trade in natural gas and with the lingering effect of the pandemic, those gas reserves are low. Energy prices are already rising sharply, impacting consumers and industry and while a complete suspension of Russia’s oil and gas operations are unlikely, even small scale disruptions will have widespread economic impacts.

2. Food

Russia and Ukraine together account for more than a quarter of global wheat exports, and more than half of the world total for sunflower oil exports. Both commodities are used in a wide variety of food products. In addition, Ukraine is the fourth largest exporter of corn and with more than 40 percent of the crop not yet shipped, there’s the risk that a large share of it won’t make it to market.  If harvesting, processing, or exporting is obstructed during the conflict in any way, importers will be hard pressed to replace those supplies. In addition, Russia supplies key ingredients for fertilizers, including nutrients, such as potash and phosphate, which enable plants and crops to grow. Natural gas is necessary to produce ammonia, the main ingredient in nitrogen fertilizers, and with gas prices already climbing, that could lead to higher costs for farmers and lower crop yields, which could mean even higher costs for food.

3. Transport

With no immediate sign of slowing down, the conflict has already had a rippling effect on freight distribution throughout the region, causing delays to the movement of goods and sparking warnings of higher shipping costs. Even though some freight services are currently being rerouted away from Ukraine, rail freight experts are optimistic that disruptions, though affected on some levels, will be kept to a minimum. 

4. Metals

Russia and Ukraine are global leaders in the production and export of metals, such as nickel, copper, iron, and titanium. Other raw materials like neon, palladium, platinum, and several chemical products, especially petrochemical derivatives and products, are also manufactured and exported in large numbers from both countries. Fears of sanctions on Russia have already increased the price of these metals.

5. Microchips

Semiconductors are in thousands of products—from computers and smartphones to appliances, gaming hardware, medical equipment, and even our cars. Ukraine produces 90 percent of semiconductor-grade neon, a critical component in manufacturing semiconductor chips and powering lasers that etch patterns into computer chips. It supplies companies in Europe, Japan, Korea, China, and Taiwan, but most of its neon is shipped to the U.S.

As the Russian / Ukrainian conflict continues, supply chain shortages and disruptions will also continue. Entities with suppliers in the surrounding regions must understand where their products are coming from to anticipate potential disruptions. 

To learn more, reach out to Sourcemap’s team of experts.