The Multifaceted Impacts of the War in Ukraine
The war in Ukraine, now in its sixth month, has had a significant impact on global food supply, raw material, and energy markets, as well as on the operations of the automotive and tire industries and spare parts manufacturers.
Trade War and COVID-19
Let’s start with a brief recap of recent history. Supply chain issues for microchips and processors began shortly after President Donald Trump, who was in office from 2017 to 2021, and his administration declared a trade war against China. At the same time, technology export restrictions took effect, which have had a detrimental impact on the complex supply chains for semiconductors and their raw materials.
In addition to production constraints, the COVID-19 pandemic has also had an impact: consumer purchasing behavior has changed, as citizens—who were at least partially forced to stay home a couple of years ago—have been buying computers and the latest consumer electronics in droves.
Just as it seemed that the pandemic was somehow being brought under control, the Russian armed forces invaded Ukraine in February of this year. A senseless war began—one that continues to rage—and its impact on global trade and various industries has been nothing short of staggering.
With a population of 45 million, Ukraine has proven to be a key player in a wide range of sectors, from steel, minerals, and fertilizers to grain and extensive operations related to the automotive industry. Ukraine has—or at least has had—more than 20 multinational companies in the automotive industry, operating over 30 production facilities. These plants have supplied their products either directly to automakers’ assembly lines or indirectly to spare parts supply chains.
Economic Sanctions Against Russia
Economic sanctions targeting Russia have also had an impact. According to market estimates, Russia accounts for approximately 40% of the global palladium trade. The precious metal palladium is used, for example, in catalytic converters, but it is also needed in the production of electronic components. In recent months, the price of palladium on the raw materials market has risen to its highest level.
