ProcurementIQ is monitoring the ongoing situation in Ukraine and will provide updates and analysis on procurement impacts as information becomes available. See the Recent Developments section of our reports for more information.
The Russian invasion of Ukraine has resulted in higher raw material prices. Russia, Ukraine and Belarus are major exporters of commodities such as precious and industrial metals, uranium, wheat, fertilizers and vegetable oil. The invasion has increased supply chain risk as the supply of these commodities may be cut off by three possible events.
First, production and transportation of commodities in these countries may be disrupted by war, choking off exports. Second, importing countries may ban the import of commodities from Russia and Belarus in retaliation for the invasion of Ukraine. Finally, Russia and Belarus may weaponize their positions as suppliers of these commodities in response to stiff economic sanctions that Western countries have placed on Russia and Belarus. A reduction in the supply of these commodities would force prices higher.
- Russia is the world’s largest exporter of wheat while Ukraine is also a major exporter; as a result, wheat futures reached their highest price since April 2008 on March 1.
- The supply of potash (a fertilizer) is at risk because Russia and Belarus are the second and third largest producers of potash in the world after Canada.
- Russia is also one of the world’s top exporters of aluminum and nickel. Aluminum prices reached a record high at $3,590 per ton on March 2 while nickel hit an 11-year high at over $25,000 per ton.
- Ukraine is a major exporter of sunflower oil; according to S&P Global Platts, Ukrainian sunflower oil futures increased 32.0% in the days following the invasion while the price of palm oil (a substitute for sunflower oil) soared 18% in the first week according to Refinitiv.
- The price of palladium is up 45.5% year-to-date while platinum prices have increased 12.5%. According to the US Geological Survey, Russia accounted for 42.9% of global palladium production and 13.9% of global platinum production in 2020.
- Russia was the world’s second-largest exporter of copper in 2018; copper futures reached $4.78 per pound ($10,545 per ton) on March 3, near all-time highs.
Impacted Markets
- Landscape maintenance will be affected by higher fertilizer prices because fertilizer is a major purchase cost for landscaping companies.
- Increases in wheat and vegetable oil prices will mean higher service prices as food is the biggest purchase cost for service providers.
- Metal can prices will be affected by higher aluminum prices as purchases of aluminum account for 42.0% of supplier revenue.
- Additionally, purchases of steel account for 16.3% of supplier revenue, so increases in steel prices will also raise prices of metal cans.
- Increases in nickel prices will translate into higher lithium-ion battery prices.
- Suppliers of lithium-ion batteries spend on average 45.4% of their revenue on metals, with nickel being the most important metal used in production.
- Higher copper prices will contribute to increases in the price of copper pipes and tubes.
