GENERAL NEWS
Ukraine invasion hits manufacturing
As embattled manufacturers struggle to recover from the pandemic ’ s impact on global supply chains , the shockwaves from the Russian invasion of Ukraine are driving up manufacturing costs . As well as causing a major humanitarian crisis , the conflict has triggered a surge in oil and gas prices as well as renewed supply chain disruption .
The Russian invasion and western sanctions are also expected to add to inflationary pressures . Sanctions on Russia could affect the availability of materials used in the aerospace , automotive and electronics industries . The high cost of oil and gas will also make the cost of energy , to drive key manufacturing processes , more expensive .
Energy , raw materials and production
According to Bloomberg , “ the cost of manufacturing household goods in Asia is being driven even higher by surging energy and commodities prices triggered by Russia ’ s invasion of Ukraine , adding fuel to the fastest global inflation breakout in decades … The United Nations estimates around 41 % of global exports are sourced from the region .”
Russia is one of the world ’ s largest producers of critical materials such as nickel , copper , aluminium and neon . The conflict has impacted raw materials costs ( such as aluminium and steel ) for manufacturers , as well as automotive vehicle production and currency markets . Its effect on Western economies could also adversely impact Asian export volumes and may also exacerbate the ongoing critical chip shortage in the industry .
Some manufacturers operating in Russia are being forced to halt or scale back production . Thousands of U . S . and European firms have key suppliers , and customers , in Russia and the Ukraine . Both countries also play a role in the downstream automotive supply chain . Around 29 % of the steel imported into the EU comes from Ukraine . It is also one of the largest suppliers of several noble gases used in the production of chips , particularly the neon used in lasers that etch features onto chips .
Automotive supply chain
“ Several dimensions of the mobility ecosystem are currently being affected , including the global automotive supply industry . Some member companies have production plants in Ukraine or rely on operations in Russia for part of their work . The industry is therefore seeing impacts in production , workforce , trade and cross-border mobility of people and goods ,” commented CLEPA ( the European Association of Automotive Suppliers ).
“ Russia has a significant automotive sector , employing around 600,000 people , roughly 1 % of the country ’ s total workforce . Several OEMs have a strong presence in Russia , mainly Hyundai and Kia but also Stellantis , Renault and Toyota , with 34 automobile assembly and production plants in-country . More than 30 European suppliers have facilities in the country and foreign direct investment by European suppliers between 2010 and 2021 totalled € 2.3- billion . Russia produced 1,767,674 vehicles in 2018 , ranking 13th among car-producing nations , and accounts for 1.8 % of worldwide production ,” it continued .
In 2021 , imports of automotive parts into the EU from Ukraine totalled € 23.3 million . Exports to Ukraine totalled € 855 million , making it the 42nd export destination for EU automotive suppliers . Russia is highly dependent upon imports of automotive parts . According to CLEPA , Russia represents :
■ 9 % of primary aluminium EU imports .
■ 42 % of semi-finished steel EU imports .
■ 42 % of palladium supply ( 85 % of palladium produced is used for automotive catalysts ).
■ 12 % of platinum supply ( 39 % of platinum produced is used for automotive catalysts ).
■ 9 % of rodium supply ( 91 % of rodium produced is used for automotive catalysts ).
■ 11.2 % of the world ’ s nickel production used in vehicle batteries .
“ Logistical disruptions , bank and payment issues and compliance concerns have halted significant parts of the flow of raw materials from Russia to the EU . In terms of critical materials , automotive suppliers are currently bracing for shortages of neon gas for microchips , palladium for catalytic converters and nickel for lithium-ion batteries ,” explained CLEPA .
“ Energy prices were already on the rise prior to the conflict in Ukraine . Europe , in particular , will probably feel the most pain from further energy price spikes , as it is dependent on Russia for natural gas . Oil prices have surged worldwide , as buyers are effectively ostracising Russian oil supplies . The factors influencing energy prices and their interlinkages require monitoring and appropriate conclusions for policy and regulation ,” it added .
Transport disruption
The crisis is also resulting in disruption of global transport and its full impact is yet to be felt . Polish transport companies alone employ 103,000 Ukrainian drivers , who either made their way to the battlefield or are seeking to bring their families to safety . Some truckers have no longer been able to cross borders , leading to separation of trucks and trailers , as the trailer crosses the border and continues with another truck / driver .
The train lines for cargo between the EU and China ( through Ukraine and Belarus ) are currently disrupted . It is important in both directions for imports of components and raw materials as well as exports of finished goods . Air transport is also blocked . The closure of Russian airspace to Western airlines has led to EU logistics companies stopping shipments there until further notice . Shipments to Belarus and Ukraine have also been affected .
Many of these companies rely on global operations and the international flow of goods . A mid- to longer term plan is urgently needed . The sector would benefit from a strategy to avoid disruptions and protect the workforce . n
6 | sheetmetalplus . com | ISMR April 2022