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A view of the Kerch Strait, which has been blocked by a Russian naval flotilla in recent days Alamy Stock Photo
Ukraine

Brace for more supply chain disruption and higher prices following Russian attacks, experts say

The global supply chain had yet to fully recover from the pandemic shock before the invasion began last night.

IRISH AND EUROPEAN businesses should be prepared for more shortages, global shipping disruption and higher raw materials prices following the Russian invasion of Ukraine, supply chain experts say.

Shipping prices have floated around record levels in the past year amid pandemic-related backlogs, shipping container shortages, congestion at ports and disrupted shipping schedules, heaping costs on businesses, which have then been passed onto consumers.

The global supply chain had yet to fully recover from the pandemic shock — and a series of unforeseen events last year like the blockage of the Suez Canal — before the attacks began early Thursday morning.

But sharply rising crude oil and oil derivative prices as a result of the war in Ukraine may spur shipping companies into price hikes over the coming days and weeks, industry sources believe.

The price of maritime fuel used to power ships had surged by 23% in 2022 alone due to ongoing upward pressure on global crude prices, Bloomberg reported earlier this week.

Goods and raw materials shortages are another concern.

While Ireland imports and exports relatively few goods directly from Ukraine, experts say the potential for disruption to European markets — particularly grains like wheat and rye as well metals like iron ore and nickel — could also have a knock-on effect here.

Ukraine is Europe’s “breadbasket”, supply chain expert Alan Holland told The Journal.

The chief executive of Cork-based sourcing technology company Keelvar said, “Wheat and barley are Ukraine’s main exports. So what you’ll see is sharp price rises in some of those food commodities across Europe.”

If the war gets “very nasty”, he said, Ukrainian farmers might not even be able to harvest crops later in the year.

In that scenario, a protracted conflict in Ukraine could cut off the country’s exports of grains, sending the price of a loaf of bread higher over the coming months.

“On the metal side — iron ore, there’s a lot of uranium mining in Ukraine and copper and nickel — you could see serious inflationary pressures,” Holland added.

“You will see tightness in the market for steel products, for example.” That’s bad news for the Irish construction sector, which has already seen the price of structural steel products balloon by 28.2% in the year to the end of January, according to the Central Statistics Office.

Logistics businesses are also increasingly concerned about the threat of cyber warfare, Holland said.

A number of the world’s major shipping companies — including Maersk and CMA-CGM — have fallen prey to cyber attacks in recent years. 

“Russia has been a source of so many cyberattacks and some of the largest companies have been attacked. No one is safe from cyberattacks,” he said. 

Disruption to shipping schedules arising from Russian naval build-up is a major concern. 

In the past 24 hours, Russian ships have blocked the Kerch Strait — linking the Black Sea and the Sea of Asov — meaning that no commercial ships have been able to pass through, according to shipping news journal Lloyd’s List

The strait has been closed off on several occasions in recent weeks by Russian naval exercises.

But a bottleneck of ships has built up there, the impact of which could lead to missed berths, backlogs and delays at ports elsewhere, experts believe.

Holland said he doesn’t believe this will cause major issues throughout the global port network.

But he said the blockage will curb Ukrainian exports generally.

He added, “It’s more of a localised problem for specific goods that are sourced directly from Ukraine that’s where the most acute problems will be.”

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