Five Ways Russia’s Invasion in Ukraine Will Impact Australian Supply Chains
Russia’s invasion of Ukraine has triggered global sanctions, and a series of economically tumultuous shifts as Western nations and NATO countries attempt to penalise Russia without waging direct war. Since Russia is a nation with significant energy and commodity supply chain resources, these strategic political moves are having a ripple effect in countries worldwide, where consumers and business owners see prices soaring. Although Australia may be on the other side of the world from Russia and Ukraine, the economy and people of this country will undoubtedly feel the financial and supply chain ramifications of Russia’s invasion.
Here are 5 supply chain elements that are poised to be heavily disrupted…
- Lack of access to energy resources
Russia is responsible for 17% of the world’s gas as the second-largest producer, and 12% of the world’s oil, as the third-largest producer. With countries including the United States signalling a halt of Russian oil imports, the price per barrel of crude oil reached a 13-year high, and gas prices have skyrocketed. These surging energy prices worldwide will contribute to reduced global growth, increased expenses in all industries, and less money to spend in the pockets of consumers.
- Wheat and cereal
Combined efforts between Russia and Ukraine account for almost 33% of global wheat exports, a supply chain already disrupted from the COVID-19 pandemic and will continue to grow unstable. With reduced access to wheat, countries around the world will see surging prices in the food industry and threats to famine and hunger in heavily dependent nations. For Australian consumers, wheat-based food items and their offshoots will be harder to get and become more expensive.
Ukraine is responsible for a significant amount of the neon used in semiconductors, and Russia is a predominant supplier of palladium, which is also used in semiconductors. With a lack of access to these raw materials, Australians can see even more expensive car prices and technological waiting lists, as the world was already recovering from a massive microchip shortage due to COVID-19. Russia also supplies aluminium, copper, nickel, and platinum—additional materials required to build semiconductors. This situation promises to worsen, although alternative suppliers arise as options.
- Aerospace and titanium
Russia represents 13% of the global titanium market—an essential material in the production of aerospace equipment and industrial applications. It makes landing gear, aeroplane blades, and disks, plus ships and submarines for the marine industry, parts for internal combustion engines used in most cars, and pieces used in medical procedures like joint replacement. Global aeroplane giant, Airbus, claims to rely on Russia for 50% of its titanium supply. Reduced access will drive prices, slow production, and severely impact global logistics.
- Overall inflation
As we have already seen, inflation is rising globally, and Australia can see over 3% increases, with the conflict triggering further raises and higher interest rates. With pay not rising proportionally, Australians will see a loss of purchasing power, harming the economy overall.