Ukraine is known as the “granary of Europe”, and many table necessities, including wheat and sunflower oil, come from Ukraine.
The war in Ukraine has not only impacted the global food supply chain, but also the commodity trading market.
Russia and Ukraine are major exporters of many basic raw materials: from wheat and grains to oil, gas, coal, to gold and other precious metals.
The BBC takes stock of the four main strategic materials affected by the Ukrainian war.
The Russian economy is highly dependent on oil and gas exports. Russia is the world‘s third-largest oil exporter, after the United States and Saudi Arabia. Before the Ukraine war, one in every 10 barrels of oil the world consumed came from Russia.
But now the global oil market faces its biggest turbulence since the 1970s due to the war and the US, Canada and the UK have announced bans on Russian energy imports.
Experts say energy prices will continue to rise during the war because there are few alternatives to Russia’s exports of about 5 million barrels a day of crude oil.
Finding alternatives will not be easy, as OPEC Secretary-General Mohammad Barkindo told reporters.
Barkindo said the world has no ability to replace Russian output. He added that people have no control over current events, geopolitics, and it is determining the rhythm of the market.
Even countries that don’t import much from Russia will be affected, as the measures could push up already high wholesale energy prices.
Both Russia and Ukraine are major food exporters. Wheat and corn exports from the two countries account for 29% and 19% of the global market, respectively, according to JPMorgan Chase & Co.
According to S&P Global Platts, Ukraine is the world‘s largest producer of sunflower oil, followed by Russia. The two countries produce 60 percent of global sunflower oil production.
Wheat and sunflower oil are also key raw materials for many foods. The price of wheat in the futures market has reached a 14-year high.
If harvesting, processing is hindered, or exports are restricted, importing countries have to find alternative sources of supply.
Analysts have warned that the impact of the war on food production could double global wheat prices.
Turkey and Egypt import nearly 70 percent of their wheat from Russia and Ukraine. Ukraine is also a major corn supplier to China.
About half of Lebanon’s food imports come from Ukraine, Beasley said. Yemen, Syria, Tunisia and others also rely on Ukrainian grains.
Beasley added that Russia and Ukraine have gone from being the breadbasket of the world to places that need someone else to provide them with bread.
“There has been an incredible reversal of reality,” he said.
Russia is one of the world‘s largest suppliers of metals used in everything from aluminum cans and copper cables to auto parts. It is also the world‘s fourth largest aluminum exporter and one of the world‘s top five producers of steel, nickel, palladium and copper.
Ukraine is also a major producer of industrial metals and, at the same time, has a significant share of palladium and platinum exports.
This means we could see an increase in canned food and copper prices due to the war in Ukraine.
London Metal Exchange (LME) Matthew Chamberlain told the BBC that aluminium and nickel prices have risen by 30 per cent since the start of the year, and eventually it will reach consumers, for example, when you buy aluminium canned drinks, or when you are renovating your home When copper wire is required.
Russia is also the third largest gold producer after Australia and China. According to the World Gold Council, Russia supplied 350 tonnes of gold last year.
Gold hit its highest price since August 2020 in early March, trading at more than $2,000 an ounce. This is due to investors seeking gold investment insurance during times of market uncertainty.
Other metals are also surging amid fears of supply chain disruptions in Russia and Ukraine.
The price of nickel, used to make lithium-ion batteries, surged 76 percent in early March, while the price of palladium, a catalytic converter used to cut emissions, also hit a record, Reuters reported.
Analysts said any disruption to palladium supply would create serious problems for auto suppliers.
Russia accounts for 38% of global palladium production, Commerzbank strategist Daniel Briesmann told Business Insider. With nowhere to make up for supply disruptions, the market could be at risk of slipping into a severe supply shortage.
Fourth, rare gases
Ukraine is one of the main suppliers of high-purity noble gases krypton and neon, which are essential materials for the manufacture of semiconductors.
According to TrendForce, Ukraine accounts for nearly 70% of the world‘s exports of high-purity neon gas, which is used in laser lithography for making semiconductor patterns. At the same time, more than 90% of the neon gas used by the US chip industry comes from Ukraine.
Any supply chain disruption could exacerbate the microchip shortage, which is already a major problem in 2021.
“With Russia supplying 40% of the world‘s palladium and Ukraine producing 70% of the world‘s neon, we can expect further global chip shortages if the military conflict continues,” Tim Uy wrote in a Moody’s analysis. deterioration”.
During the 2014-2015 war in Ukraine, the price of neon rose several times, showing how dire the situation is for the semiconductor industry, Yuy said.
“Semiconductor companies account for 70% of the total demand for neon gas, which is an integral part of the lithography process for making chips,” he added.