The Russia-Ukraine War: which industries are most affected?

The World Trade Organization (WTO) is cautioning that although Russia's invasion of Ukraine has caused great misery, it is also harming international trade, which will likely have the greatest effect on low-income countries.

According to the WTO's Trade Forecast 2022-2023, since the war began on February 24th, the outlook for the world economy has gotten worse. WTO analysts have now revised their downward projection for 2022 from 4.7 percent to 3 percent growth in merchandise trade volumes, which includes both import and export of goods.

Food and fuel issues as a result of the Ukraine war. The poorest people in the world may be forced to go without due to decreased supply and rising prices for food.

The Ukraine crisis has reportedly had the most significant immediate economic impact on commodity prices, according to the WTO.

The WTO cautions that the suspension of grain imports through Black Sea ports might have serious repercussions for food security in underdeveloped nations.

Additionally, new COVID-19 lockdowns in China are obstructing maritime traffic. This can result in fresh raw material shortages and higher inflation.

WTO experts have utilized simulations to formulate fair trade assumptions due to the absence of concrete evidence on the economic effects of the Ukraine conflict and the uncertainty surrounding its outcome. The rise of global merchandise trade volumes in 2022 may range from 0.5% to 5.5%.

If new information becomes available, the estimates may be adjusted earlier than October.

The WTO claims that in times of crisis, more commerce is required—not less—to ensure that everyone has access to necessities. Governments and ally groups are being urged to collaborate in order to promote commerce.

Numerous businesses are still working to recover from the COVID-19 pandemic's economic effects, and now they will face new challenges.

Automobile sector

Since the epidemic first began in 2020, the vehicle sector has been experiencing difficulties. In India, sales are still below pre-pandemic levels, which will result in increased input costs for steel and petrol for the automotive industry.

Logistical expenses will rise as a result of rising fuel prices as crude approaches the $120 per barrel threshold. The cost of other base metals like nickel and aluminum, which are also utilized in the automotive sector, has also significantly increased.

Semiconductor sector

While Ukraine is the world's top provider of rare gases used in industrial lasers used to create semiconductor chips, Russia is one of the biggest global suppliers of rare metals used in the semiconductor production process.

The flow of both materials has been stopped to enterprises, and if the fight lasts for an extended amount of time, the semiconductor industry is preparing for another supply-chain shock.

Farming sector

Together, Russia and Ukraine account for about 30% of the world's commerce in wheat, 32% of that in barley, and 17% of that in corn. Prices for pantry staples like bread, pasta, and other FMCG products have increased as a result of the rapid price increases and the cessation of supplies from the two nations.

Shorter supplies mean that prices will rise as demand remains inelastic, which would hurt even the countries that depend on imports of food products.

Farmers will be paying even higher rates for agricultural supplies like fertilizers, many of which are manufactured using crude oil and natural gas, making this a bad moment for them.

Edible oils

Among the top exporters of edible oils, particularly sunflower oil, are Russia and Ukraine. A total of 18.93 lakh tonnes of sunflower oil were imported, with 13.97 lakh tonnes coming from Ukraine and an additional 2.22 lakh tonnes coming from Russia.

The supply of sunflower oil from the two countries is anticipated to significantly decline as the invasion has reached its peak, leading to a substantial rise in prices. The FMCG sector, which depends on food oils that have already seen their costs rise, would also be impacted by this.

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