The raw materials soared to the “Demon Nickel” breaking $100,000! A look at how the Russian-Ukrainian war is hitting supply chains

The Russian-Ukrainian war pushed up commodity prices, which hit the global financial market violently. The international nickel price even soared to US$100,000 per ton, an unprecedented 250% increase in two days, and finally the London Metal Exchange (LME) suspended nickel futures Contract transactions, and the recent war has hit the international crude oil, wheat, soybean, corn, and natural gas prices continue to soar, which will have an impact on Taiwan’s energy, food, and electronic supply chains.

  1. Energy
    The first is that Russia’s global natural gas and crude oil market accounts for 17% and 11% respectively. If energy exports are blocked, it will seriously lead to energy inflation. In addition, the United States announced sanctions on Russian energy. The United Kingdom then announced that it will be phased by the end of this year. With the cancellation of Russian oil imports, the international oil price hit a new high, soaring to $130 per barrel, and the ensuing price rise may spread to the world.

Russia’s natural gas industry announced that its natural gas exports in the latest January-February period decreased by 32.6% year-on-year. Due to the start of the Russian-Ukrainian war, geopolitical risks have increased. Assuming that Russia’s natural gas exports to Europe are reduced by 30% this year, the conversion will create a certain supply gap in Europe, and it must be completely Filling the supply gap has its challenges.

According to satellite data analysis, the average number of LNG ships operating in the waters around Europe was 40 in January, an annual increase of 67% compared with 24 in the same period last year, and the number continued to increase. Due to the start of the Russian-Ukrainian war, the risk of natural gas supply interruption in Russia has increased, and the supply of natural gas has increased. The nervousness pushed European prices sharply higher.

Cathay Pacific Futures believes that if the war is prolonged, the international energy market sector may be reshuffled. Considering the relatively stable political and economic development of the United States, it is estimated that the number of LNG exports from the United States will increase year by year, seize the European market share of Russian natural gas, and the United States and OPEC maintain At present, it is estimated that crude oil and natural gas prices will remain high in the first half of this year, and inflation will continue.

  1. Food
    Russia’s wheat market accounts for 9% of the global market. If it is blocked, it will make global food inflation worse. Although the world’s main soybean and corn producing areas and exporters are in the Americas, Russia and Ukraine only account for a high proportion of wheat and various grains. There is more or less substitution between food crops, and higher oil prices push up transportation and mechanical farming costs.

China, the United States, Brazil and Argentina are the world’s major soybean and corn producing countries. According to USDA estimates, the four countries together account for 86.9% of the world’s soybean production and 68.5% of the world’s corn production, while Russia and Ukraine only account for 2.1% and 4.4% respectively. , but the output of wheat in Russia and Ukraine is relatively high in the world, with wheat accounting for 14% and barley accounting for 18.2%.

In 2021, Taiwan will import goods worth US$5 billion from Russia, of which 89% are coal, steel billets, oil and natural gas, and only 0.35% of agricultural and fishery products. After excluding the top two largest tobacco and frozen aquatic products, the remaining agricultural products only account for agricultural and fishery products. 25.7% of the total production, equivalent to 4.56 million US dollars, while imports from Ukraine are only worth 166 million US dollars, but as high as 43.2% are agricultural products, the top two are sunflower oil and corn.

Neither Russia nor Ukraine is Taiwan’s main importer of agricultural products. Only sunflower oil is mainly imported from Ukraine, which can be replaced by other edible oils, while Huang Xiaoyu and miscellaneous grains are mostly imported from the Americas and Australia. Although they will not be cut off, the import cost will be greatly increased. , Most of the domestic food raw materials rely on imports, and the food industry will face greater cost pressure in the short term.

  1. Semiconductor
    Ukraine is a major supplier of semiconductor raw material gas, providing more than 70% of neon gas for global semiconductor equipment, of which neon gas is mainly used in the laser of deep ultraviolet light source (DUV) equipment, although neon gas is not the gas with the highest proportion of applications, However, if there is a shortage, it may cause the shipment of semiconductor equipment to be insufficient, and affect the expansion and production progress of the wafer foundry.

Russia holds more than 45% of the world’s palladium supply. Due to its good ductility and plasticity, it can be used as an indispensable key material in high-tech fields such as aerospace, navigation, military, nuclear energy, and automobile manufacturing through forging, rolling and wire drawing applications. , If Russia cuts off the supply of palladium, it may lead to a shortage of target material supply, which may lead to another interruption in the shipment of wafer foundries.

The fluctuation of nickel price is closely related to stainless steel, which has caused the relevant stainless steel industry in Taiwan to announce a complete closure. If there is a subsequent shortage of nickel ore, resulting in a surge in nickel prices, upstream stainless steel suppliers will inevitably increase their prices significantly. It is estimated that manufacturers may face profit compression in the short term. In the long run, downstream consumption will be further suppressed.

  1. Memory
    Some processes in the memory-related industry use palladium products. If the supply of palladium in Russia is interrupted, it may have an impact on memory shipments. At present, nearly 90% of memory processes use DUV equipment. , it may lead to insufficient supply of DUV equipment, and the supply of memory will be seriously affected.
  2. Stainless steel
    Russia is the world’s largest producer of nickel ore. At present, the total nickel production accounts for about 5.3% of the global supply. Among them, nickel is mainly used in a large number of areas, including stainless steel, batteries and alloys. The two-day rise reached an unprecedented 250%, and finally the London Metal Exchange (LME) even suspended trading in nickel futures contracts.
  1. Aircraft
    Russian state-owned enterprise VSMPO-Avisma is the world’s largest titanium supplier, producing more than 30% of the world’s titanium metal, about 65% of Airbus’s titanium metal, Boeing’s 35% of its titanium metal, and Brazil’s aviation industry ( Embraer) all titanium comes from this company.

Titanium, which is favored by aircraft and car manufacturers due to its lightweight, high strength and heat resistance properties, has also been fluctuated by the Russian-Ukrainian war. Boeing, the American aerospace giant that has long cooperated with VSMPO-Avisma, said in a statement, Titanium purchases from Russia have been suspended, emphasizing that it has sufficient inventories and diversified sources.

  1. Market
    Ye Wanting, a key income-earning multi-asset fund manager for KGI’s future generations, said that short-term geopolitical risks will still affect market sentiment. Sanctions have caused soaring raw material prices, causing inflation concerns. Western countries have gradually expanded sanctions against Russia, and the conflict between Ukraine and Russia There is no sign of relief in the short term, market risk sentiment is further avoided, and short-term market volatility will continue to intensify.

Weng Yujie, head of KGI Investment Strategy Department, said that although the US Congress advocated sanctions on Russia’s energy exports, the German Chancellor issued a statement saying that Russia’s oil and natural gas are very important to Germany, and the domestic consensus is to maintain Russia’s energy supply. The EU has not yet reached a consensus on energy sanctions, and the impact of subsequent sanctions on raw material prices must continue to be observed in the future.

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