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War in Ukraine replaces covid-19 as the biggest risk to the supply chain: Moody's

2022-03-04T14:31:55.926Z


Covid-19 has pushed global supply chains to their limits. Now the Russian invasion of Ukraine threatens to hit them even harder.


These are the effects of the sanctions on Russia 1:21

(CNN Business) ––

Covid-19 has pushed global supply chains to their limits, creating shortages and driving up prices.

Now, just as the pandemic improves a bit, the Russian invasion of Ukraine threatens to hit those fragile supply chains even harder.

  • Russia-Ukraine War: Breaking News, Invasion Analysis and News

Russia is a huge producer of raw materials: from oil and natural gas to palladium and wheat.

For its part, Ukraine is also a major exporter of wheat and neon.

So the crisis calls into question the availability of a sizeable part of these vital supplies.

"The greatest risk facing global supply chains has shifted from the pandemic to the military conflict between Russia and Ukraine, and the geopolitical and economic uncertainties it has created," Tim Uy, an economist at Moody's Analytics, wrote in a report Thursday.

Crisis will exacerbate supply chain crisis

Along these lines, Moody's warned that the crisis between Russia and Ukraine "will only exacerbate the situation of companies in many industries."

Especially those that depend on energy resources, he said.

Europe, specifically, will feel the biggest hit from rising energy prices, as it relies on Russia for natural gas.

In addition, oil prices have soared around the world, raising gasoline costs and spending prospects for airlines and other sectors, such as plastics, that rely on oil.

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  • Russia admits its economy suffers "hard hits" as isolation increases

The conflict between Russia and Ukraine could also increase pressure on the global shortage of computer chips.

Situation that began during the covid-19 and drove the increase in the prices of new and used cars.

Moody's noted that Russia supplies 40% of the world's palladium, a key resource used in the production of semiconductors.

In addition, the company said Ukraine produces 70% of the world's neon, a gas used to make computer chips.

"We can expect the global chip shortage to worsen if the military conflict persists," Uy wrote.

Russia faces financial collapse from sanctions after attacks on Ukraine 1:09

Neon prices skyrocketed during the 2014-2015 conflict in Crimea.

Although chipmakers have hoarded resources, Uy cautioned that inventories can only be held for so long.

"If no deal is negotiated in the next few months, you can expect the chip shortage to get worse," Uy said.

And he added that this will pose significant risks to automakers, electronics companies, phone makers and other sectors.

Uncertainty about what's to come

The combination of high energy prices and increased pressure on the supply of computer chips will complicate the inflation picture.

Consumer prices soared in January at the fastest pace in nearly 40 years.

Although many economists anticipated inflation to cool significantly later this year, that outlook is now in doubt.

  • Russia faces financial collapse as sanctions hit its economy

“The short-term effects on the US economy from the invasion of Ukraine, the ongoing war, sanctions and future events remain highly uncertain,” Federal Reserve Chairman Jerome Powell told Congress on Wednesday.

Beyond computer chips, Moody's noted that the Russia-Ukraine crisis has the potential to increase transportation costs.

Precisely, the industry that consumes the most energy.

"While the world will be relieved to have seemingly overcome the omicron variant [of the novel coronavirus]," Uy wrote, "a new challenge has arisen where the end game is unclear."

supply chain

Source: cnnespanol

All news articles on 2022-03-04

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