Photo taken on Feb 27, 2022 shows smoke rising in the sky in Kyiv, Ukraine. [Photo/Xinhua]
The ongoing Russia-Ukraine conflict has already had a huge impact on global supplies of commodities, highlighting the role the two countries play in the global supply chains. The supplies of not only oil and gas but also many agricultural and industrial commodities have been hit because of the conflict, creating new challenges for a world that is already struggling with climate change and a food crisis.
If the conflict continues, some global commodity supply chains could be re-forged. Since wide areas producing agricultural products such as grains and oil crops, chemical fertilizers, ferrous and nonferrous metals, and noble gases have been affected by the conflict, supply shortages will hit consumers in the European Union, the Middle East and Africa.
In 2019, Russia was the world's third-largest producer and largest exporter of wheat, largest producer of barley, second-largest producer of sunflower seeds, third-largest producer of potatoes and milk, and the sixth-largest producer of eggs and chicken, according to the US Department of Commerce.
Ukraine, on the other hand, is the world's largest exporter of sunflower oil, third-largest exporter of rapeseed, fourth-largest exporter of corn and barley, sixth-largest exporter of wheat and the sixth-largest exporter of soybean.
Together, Russia and Ukraine produced 14 percent of the world's wheat, and accounted for 29 percent of global wheat, 19 percent of global corn and 80 percent of global sunflower oil exports.
Russia and Ukraine are also major global suppliers of industrial products including palladium, nickel, aluminum and copper in nonferrous metals; neon in rare gases; and iron in ferrous metals. Russia is estimated to produce about 40 percent of the world's palladium-used to make chips for electric vehicles-10 percent of the nickel, 6 percent of the aluminum, and 4 percent of the copper. And Ukraine, aside from noble gases, also produces neon, krypton and xenon, and is the world's biggest producer of neon.
These products are critical to the world's transformation to low-carbon development.
The impact of the Russia-Ukraine conflict on agricultural products will be widespread in Africa, Asia, Europe and Latin America. For example, Egypt gets 86 percent of its wheat imports from Russia and Ukraine while Turkey gets two-thirds. Wheat imports from Ukraine account for 50 percent of Lebanon's total consumption, 43 percent of Libya's, and 21 percent of Bangladesh's. Many Asian countries such as Indonesia, the Philippines, Thailand and the Republic of Korea also import wheat from Ukraine.
As for China, it sourced 29 percent of its imported corn, 26 percent of barley, and about 50 percent of non-transformed soybean from Ukraine in 2021. China also bought 18 percent of its refined nickel from Russia, and nearly 40 percent of Ukraine's iron ore exports. And high-quality pellets and pelletizing powder from Ukraine accounted for 11 percent and 17 percent of its total imports.
Russia exports about 3 million tons of electrolytic aluminum every year, mainly to Europe which is also heavily dependent on Russia for nickel ore. When it comes to neon, the reduction in its supply will deal a serious blow to chip production across the world.
Furthermore, global trade channels, too, are likely to be disrupted, because some Russian banks have been banned by the Society for Worldwide Interbank Financial Telecommunication, which serves as an intermediary and executor of financial transactions between banks globally.
In short, the conflict could affect food security and slow down global shift to low-carbon development, by hampering production in Russia and Ukraine, which are two of the largest producers of agricultural products and other commodities in the world.
The war, in fact, could reshape the global food trade pattern. If the conflict is prolonged reducing the transportation of products through the Black Sea ports, many countries could start buying Australian wheat and US corn. Egypt, for example, is already purchasing wheat from Romania.
Also, countries in Southeast Asia, Latin America and Oceania can seize the opportunity to increase their metal production for exports. In 2021, Russia, the Philippines, and Indonesia were the world's largest producers of nickel, which is used to make car batteries, with Indonesia accounting about 37 percent of the total global production. So, if Russia's nickel supply is disrupted, Indonesia and the Philippines could expand their nickel production to grab a bigger share of the global market.
And if there is a shortage in global neon supply, China can exploit its resources to fill the gap. China already has advanced technologies to produce neon, and exported about 70,000 cubic meters of the inert gas last year. Since neon is necessary to make chips, the rising global demand for neon may force China to boost its industrial chains for chips.
Source: Chinadaily
Source: Chinadaily
The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.
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