4 Key Supply Chain Channels: How Has The Russia-Ukraine Conflict Disrupted Global Trade?

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Frost & Sullivan finds that the Russian and Ukrainian economies will take a severe hit, contracting 11.5% and 25.5% respectively in 2022, while oil-exporting majors will reap gains from soaring oil prices

San Antonio, TX – April 25, 2022 – The Russia-Ukraine conflict and resultant sanctions on Russia have disrupted global energy and food trade, increased logistics costs, and fanned inflationary pressures, creating a challenging environment for businesses and policymakers alike. While the crisis will result in a near-term slowdown of global trade and economic growth, the Russian and Ukrainian economies will take a severe hit, contracting 11.5% and 25.5% respectively in 2022.

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The conflict is also seen to be driving macroeconomic shifts and a reorientation of trade and supply chains. India, for example, is stepping in to replace agri-food exports, while South Africa and China could capture a greater share of the neon and palladium export market, in light of disruptions in Russia and Ukraine.

Because of the high convergence between the topics the publication covers and the research our team is developing, we would like to share with you our core insights on our upcoming analysis, Global Macroeconomic Implications of the Russia-Ukraine Conflict, 2022.

The analysis evaluates the economic fallout from the Russia-Ukraine conflict by quantifying the impact on economic growth and inflation in key markets and gauging the extent of global trade flow and supply chain disruptions. It also highlights scenario-based energy price forecasts, key industry outlook, and medium-term regional policy pivots to fortify scenario-planning capabilities and identify near-midterm growth opportunities. Key growth opportunities identified in the analysis include an accelerated green energy push, new domestic and export-oriented manufacturing opportunities, and localized agri-production.

Key Disruptions Stemming From The Russia-Ukraine Conflict

Frost & Sullivan has identified four key disruptions and transformative shifts:

  1. Agri-food disruptions are contributing to higher input and processing costs for food producers and increasing prices for end-consumers. The right set of policies will enable countries to step in for trade flows from Russia/Ukraine and grow agri-food export markets.
  2. Energy market volatilities are impacting a range of industries through higher operating costs, with the potential to squeeze profit margins for businesses. Elevated oil prices will drive higher oil revenues in oil-exporting, oil-reliant economies, which can be channeled into building a more diversified economy.
  3. Key metal shortages can impact the electronics and automotive sectors, with the potential to limit production in case of protracted shortages.
  4. Logistics disruptions and higher freight costs are delaying input availability and increasing sourcing costs for businesses. Demand for local manufacturers will consequently rise as businesses seek to circumvent trade disruptions and cargo delays.

“Businesses will need to increasingly transition from just-in-time manufacturing and supply chain strategies to just-in-case strategies” explained Neha Thomas, Senior Economist, Frost & Sullivan. “Companies leveraging additive manufacturing, supply chain diversification, and part-onshoring of production will emerge as winners due to insulation from higher logistics costs as well as input shortages”