From the perspective of international trade, let’s analyze which industries and supply chains are affected by the Russian-Ukrainian war.
1. Shipping faces severe labor shortages.
According to statistics from the International Chamber of Shipping, 10.5% of the world’s 1.89 million seafarers are Russians and 4% are Ukrainians. Russian and Ukrainian seafarers account for about 15% of the world’s seafarers, and shipping may face a more serious labor shortage. With 90% of global trade being transported by ship, supply chains could be disrupted.
2. Imports and exports to Russia and Ukraine were severely affected.
Since the 24th, the Ukrainian military has suspended commercial shipping at the port, and the port of Odessa, Ukraine’s largest port, has also been closed.
Russia is banned from the SWIFT system, and foreign trade routes will be cut off. SWIFT is considered a “financial nuclear bomb” in sanctions. For European countries that buy a lot of products such as Russian oil and gas, there will be difficulties in payment.
3. Supply shortages in the global nickel and aluminum markets have intensified.
Russia has many rich mines, with nickel exports accounting for 49% of the global market, palladium exports 42%, aluminum exports 26%, and platinum exports 13%.
Nickel is a necessity for the manufacture of new energy vehicles. In 2021, the global nickel market will have a shortage of 144,300 tons of nickel. In the first 11 months of last year, Russia’s nickel exports were 45,100 tons.
Palladium is an important raw material for making sensors, memory and more.
The EU sanctions Russia, and companies such as Russia’s Norilsk Nickel and Rusal cannot export trade, while 10% of the world’s nickel supply comes from Norilsk Nickel and 5% of its aluminum supply comes from Rusal, which will intensify Supply shortages in the global nickel and aluminum markets.
4. Crude oil shortage, sea freight, air freight prices are expected to rise sharply.
In 2021, Russia’s crude oil output will be 534 million tons, accounting for 12% of the total output that year, ranking second only to the United States.
Russia exports an average of 4.65 million barrels per day, accounting for 11.3% of total exports, ranking second in the world after Saudi Arabia.
China and the European Union are major importers of Russian crude oil. The EU is the world’s largest importer of crude oil, accounting for 80% of imports, of which Russia is the largest seller, accounting for about 30%.
At present, the freight rate of small and medium-sized oil tankers represented by the common Suezmax and Aframax tankers in the Black Sea region has risen more than five times a day. Rentals for Baltic-related Afra-types are reaching levels around $100,000. The equivalent time charter rental of Afra-type tankers in other regions is only about US$20,000 per day.
5. Natural gas prices have risen sharply.
By the end of 2021, Russia has proven natural gas reserves of 37.4 trillion cubic meters, accounting for 19.8% of the global total. The output is large, and the export volume accounts for 16.2% of the global total.
30% of Europe’s natural gas is supplied by Russia.
There are two channels for Russia to send natural gas to Europe, Nord Stream 1 and Nord Stream 2. Nord stream 2, the current Nord stream 2 has been suspended. European applications for Russian gas transiting through Ukraine are still at their highest level, according to the Ukrainian gas transportation system operator. Applications for Russian gas reached 109.5 million cubic meters on February 25, the highest level since 2022. The application volume reached 108.1 million cubic meters on February 26.
Gas shortages in Europe intensify, and gas prices will soar further.
6. The shortage of rare gases may affect the supply of chips.
Ukraine and Russia mainly produce neon, krypton and xenon, all three of which are key materials for making chips.
Ukraine supplies 70% of neon, 40% of krypton and 30% of xenon in the world.
7. Rising food prices.
Ukraine owns 40% of the world’s black land and has always been a famous granary.
In 2021, Ukraine exported 23.1 million tons of corn, 16.6 million tons of wheat and 4.2 million tons of barley, ranking second in the world in total grain exports. Ukraine is also the world’s largest exporter of sunflower seeds and the third largest producer of rapeseed.
Russia is the world’s largest exporter of wheat.
Futures on 23 energy, raw materials and crops on the Bloomberg Commodity Index traded about 6% above one-year forward contracts, which is higher than any month-end backwardation in at least 15 years. From oil to corn, indices keep hitting new highs.
Russia is the world’s largest exporter of nitrogen fertilizers, the world’s second-largest exporter of potash fertilizers, and the third-largest exporter of phosphate fertilizers. Natural gas is the main raw material for the production of nitrogen fertilizer, but the supply of natural gas is insufficient and the price of nitrogen fertilizer is soaring.