THE GLOBAL SUPPLY CHAIN CONSEQUENCES OF THE RUSSIA UKRAINE WAR

Its been approximately $3$ years since the Russia$-$Ukraine war began, when Russia invaded Ukraine after supporting the

separation of Ukrainian territory. The impact has been global. Immediately, aid agencies worried that Ukraines grain would

be stuck in ports, unable to reach countries that rely on it$.$ This was just one example of how the regional conflict has forced

countries around the world to source food, raw materials, fossil fuels and other key items from new trading partners. Asoo

Vakharia, a supply chain researcher and McClatchy Professor in the University of Floridas Warrington College of Business,

has been tracking trends in these global disruptions. While economic $2022$ data is still being finalized, Vakharia discusses

what we know about the disruption from the war, how countries are coping with the changes, and future supply chain

challenges.

Prior to the war, Ukraines top export was agricultural products $(46\%)$ followed by manufactures $(42\%).$ Manufactures are

what we call semi$-$finished products. So multiple countries have imported some raw materials, produced some semi$-$finished

materials and exported them out. Ukraines primary export destinations were the European Union $(39\%)$ China $(12\mathrm{.}1\%)$

Turkey $(6\mathrm{.}1\%)$ and Russia $(5\mathrm{.}1\%).$ Russias top exports were fuels and energy products $(63\%),$ followed by metals $(10\%$

percent$),$ machinery and equipment $(7\mathrm{.}4\%),$ and chemical products $(7\mathrm{.}4\%)$ with top export destinations being the China

$(12\%),$ Germany $(9\%),$ and the Netherlands. It is worth noting that Russia produces about $25\%$ of the worlds nitrogen

fertilizer and is a major supplier of energy to the European Union. Wheat exports from Russia and Ukraine accounted for

$28\%$ of global wheat exports. In addition, there is a significant decrease in fertilizer exports from Russia. This is particularly

troublesome since it is essential to growing and eventually harvesting grain.

Grain exports out of Ukraine dropped significantly at the start of the war with some recovery through the Black Sea Initiative

$($an agreement allowing Ukraine to export grain$).$ Declines in agricultural exports will be highly significant such $50\%$ in

sunflower oil, $25\%$ for maize and a decrease of $10\%$ for wheat. Those countries that depended on Ukraine and$/$or Russia for

key imports are most vulnerable. For example, many African countries rely on grain from Ukraine and Russia to support

more than $50\%$ of their domestic consumption. Unfortunately, these countries do not have the buying power to shift to

higher$-$cost sources and thus, one direct effect is grain shortages in Africa. A second obvious impact of the shortages and

disruptions is the increase in inflation across the world stemming from higher prices.

A lot of natural gas supply for Europe comes from the Nord Stream pipeline out of Russia, which is now limiting the supply it

sends through the pipeline. This supply shortage has resulted in significant price increases. For example, in the first six

months after the start of the conflict, natural gas prices rose by $120-130\%$ and coal prices rose by $95-97\%.$ These shortages

and corresponding price increases might be here for some time since alternative sources are either not available for

technological reasons or simply do not exist. In the U$.$S$.,$ the war has restricted supply of key metals imported from Russia.

For example, $30\%$ of platinum group elements, $13\%$ of titanium, and $11\%$ of nickel imported into the U$.$S$.$ were sourced from

Russia and these are no longer available. Considering that batteries powering automobiles and electronics use nickel as a

primary element, these shortages have disrupted the production of important goods. Titanium shortages are also of

significant concern since it is one of the strongest metals used to manufacture a variety of industrial products.

QUESTION $2(25$ Marks$)$

Patrick Doyle the CEO of Tiger brands a JSE listed Fast$-$moving consumer goods $($FMCG$)$ organisation headquartered in

Sandton has also been closely monitoring the developments of this global crisis. Examine whether Tiger brands supply

chains will be affected by this crisis and suggest the strategies that need to be adopted to minimise the identified impacts.