War in Ukraine will compound global supply chain problems

The news: The conflict in Ukraine is expected to have a domino effect on various supply chains as global companies close factories during the Russian invasion.

What this means: We’re already seeing the Ukraine conflict’s effect on gas prices, and now everything from food to materials for chip and automotive production could be disrupted, per Bloomberg.

  • Various multinational companies have shuttered their factories and offices in Ukraine, halting the production and shipment of goods and components.
  • Ukraine and Russia together account for nearly a third of the world's wheat market, 19% of the world corn supply, and 80% of exported sunflower oil, per Insider.
  • Russia is the third-largest supplier of nickel for lithium-ion batteries.
  • The two countries also lead the global production of copper and platinum. In context the trading price of palladium, a necessary component of chip manufacturing, is up 80% since mid-December, per The Conversation.

The bigger picture: Russian aggression in the region is expected to further deepen the chip crisis and fracture supply chains that are already reeling from the effects of the coronavirus. 

  • Larger chip manufacturers expect minor supply chain disruptions due to stockpiling and diversified procurement of components, but long-term impact of the conflict could further extend the shortages.
  • “Disruptions to the flow of any of these materials would have a costly effect around the world, particularly in Europe and North America,” Fitch Solutions Country Risk & Industry Research said.

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