Which industries may be affected by the Russia-Ukraine incident?

Since the outbreak of the conflict between Russia and Ukraine this year, Russian-Ukrainian relations are still in a relatively tense state, and the sanctions announced by European and American countries have further added new uncertainties to the international situation. Under the background that the overseas environment is still complex and changeable, which industries are more likely to be potentially affected by the Russia-Ukraine incident from the perspective of the global supply chain? This paper analyzes this based on the export data of Russia and Ukraine.

1. Priority areas of Ukraine's exports: gases for agriculture and semiconductor production

Recently, European and American countries have announced a series of sanctions on the conflict between Russia and Ukraine. According to a statement issued on March 16 by the official account of the Xinhua News Agency, citing the Kremlin website, Putin said at a meeting on the same day that Western sanctions against Russia have dealt a serious blow to the global economy. The West uses economic, financial, trade and other sanctions as "weapons" against Russia, leading to higher gasoline, energy and food prices. The sanctions have also dealt a blow to Europe and the US themselves. From the perspective of global trade, even if the tension between Russia and Ukraine is gradually alleviated, the impact of the early conflict and a series of sanctions may make it difficult for Russian-Ukrainian trade to recover quickly. Looking back, if the supply from Russia and Ukraine is limited, which industries and economies will have a potential impact?

Ukraine's export structure: mainly agricultural products and steel ores.First of all, let's look at Ukraine's export trade structure. Of Ukraine's total exports in 2020, cereals (including wheat, barley, corn, etc.) accounted for 19%, and animal and vegetable oils accounted for 12%. At the same time, steel and ore accounted for 16% and 9%, respectively. In terms of the main targets of exports, Ukraine's exports to China, Russia and EU member states accounted for 14%, 6% and 36% of the total exports in 2020.

From the perspective of global supply: Ukraine is an important global exporter of gases for agricultural products and semiconductor production.Observing a country's trade structure can provide a preliminary glimpse of its role in the global supply chain and value chain. From Ukraine's export structure, we can see that Ukraine's exports are mainly resource goods, corresponding to its upstream position in the international division of labor. We further analyze the proportion of Ukraine's various resource products in the global supply chain and find that Ukraine occupies an important position in the supply of agricultural products and some rare gases:

In terms of agricultural products, although Ukraine accounts for only 3% of the world's corn production and 4% of the world's wheat production in 2021, Ukraine is the world's fourth largest exporter of corn and wheat, accounting for 14% of the world's corn exports in 2021 and 10% of the world's wheat exports. In addition to major crops such as corn and wheat, Ukraine also has a greater impact on the global supply of sunflower oil, accounting for 31 per cent of the world's sunflower oil production and 47 per cent of exports in 2021. In terms of trade objects, the main exporters of Ukrainian grains are China, Southeast Asian and North African countries, and the main exporters of animal and vegetable oils are India, China, the European Union and so on.

Apart from agricultural products, Ukraine is also a major supplier of rare gases such as neon, krypton and xenon, which are important materials in the production of chip semiconductors. TrendForce research shows that Ukraine supplies about 70 per cent of neon, 40 per cent of krypton and 30 per cent of xenon. In terms of export targets, South Korea accounted for 38% of Ukraine's rare gas exports in 2020, the United States accounted for 26%, and China accounted for 6%.

2. High quality developmentPriority areas of Russian exports: energy, agriculture and metal minerals

Russian export structure: mainly energy, metals and agricultural products.Looking at Russia, from the composition of Russian merchandise exports in 2020, energy (oil, natural gas, etc.) accounted for 42% of the total exports, followed by precious metals (gold, palladium, platinum, etc.) accounted for 9%, iron and steel accounted for 5%. In addition, all kinds of agricultural products are also the main items of Russian exports. In terms of export targets, China is Russia's largest export partner in 2020, and Russian exports to China account for about 15% of the total export value, followed by European countries.

Like Ukraine, Russia is a traditional resource-based country. Based on the analysis of Russia's share in the global supply of all kinds of resource goods, we find that Russia has a great influence on the supply of related commodities such as energy, agriculture and metal minerals.

Russia has an important influence in the global energy field.In terms of energy, Russia's share of global crude oil and natural gas exports reached 11% and 16% respectively in 2021, making it the largest natural gas exporter. In terms of energy exports, Russia's main energy exporters are China and the European Union. China accounts for 21% of Russia's fossil fuel exports, while EU countries as a whole account for 45%. Among them, the EU is highly dependent on Russian energy imports. According to EU statistics, about 41% of EU natural gas imports in 2019 come from Russia, while 27% of imported crude oil and 47% of imported coal.

In terms of metals: Russia's output and exports of palladium, platinum, nickel and other metals account for a high proportion of the world.Russia is the largest producer of palladium, accounting for 37 per cent of global production in 2021 and 25 per cent of global palladium exports in 2020, according to the US Geological Survey. In addition to palladium, Russia's metal production accounts for a high proportion of nickel, platinum and gold in the world, accounting for about 10% of global output. Russia's exports of nickel and platinum account for about 13% of the world's exports. Gold exports account for 5%. In addition, Russia's industrial diamond and gemstone production also accounts for 33% and 29% of the world's total output. In terms of major trading partners, Russia's exports of gems and precious metals in 2020 are mainly to the United Kingdom (42%), Belgium (14%), the United States (10%), Japan (6%) and so on.

Russia: the world's largest exporter of wheat and fertilizer.In agriculture, Russia is the world's largest wheat exporter, accounting for about 10% of the world's wheat output and 16% of the world's exports in 2021. Russia's largest trading partner in overall grain exports is the Middle East. For example, Turkey accounted for 20 per cent of Russia's grain exports in 2020, followed by Egypt with 19 per cent and Saudi Arabia with 6 per cent. As for other agricultural products, Russia also accounts for a higher global share of sunflower oil exports, accounting for 30% of the world's total exports in 2021. In addition, in the chemical fertilizer industry chain, Russia is the world's largest exporter of chemical fertilizer. Russia's exports of chemical fertilizers such as ammonia, potash and urea all account for about 15% of global exports. Brazil, Estonia, China, India and the United States are the main targets of Russia's chemical fertilizer exports.

3. Some of China's imports of agricultural products, energy and metals depend on Russia and Ukraine.

As far as China is concerned, what is the proportion of the foreign trade of Russia and Ukraine in China?In terms of total amount, the proportion of China's imports from Russia and Ukraine to China's total imports is relatively low.In 2021, China's imports of Russian goods accounted for only 3% of China's total imports, while Ukraine accounted for only 0.4%. ButStructurally, some of China's imported agricultural products, energy and metals are highly dependent on Russia and Ukraine.

In agriculture, China has a great demand for Russian-Ukrainian wood, fertilizer, vegetable oil, corn and barley.For example, in 2021, China imported nearly 20 billion yuan of wood from Russia, accounting for 39% of the total timber imports; for example, China imported fertilizers from Russia totaling 5 billion yuan, of which 4.3 billion was potash fertilizer, accounting for about 1/3 of China's total potash fertilizer imports; in terms of vegetable oil, 17% of China's imported rapeseed oil came from Russia and 68% of its sunflower oil came from Ukraine. In addition, China also has a large demand for corn and barley imports from Ukraine. In 2021, China imported about 15 billion yuan of corn (accounting for 29% of the total corn imports) and about 6 billion yuan of barley (accounting for 26% of the total barley imports).

In terms of energy, in view of China's national conditions of being rich in coal, poor in oil and little in gas, China has always been highly dependent on crude oil and natural gas imports in the past. Measured by the ratio of import to consumption, China's dependence on crude oil imports is about 74% in 2021 and that on natural gas imports is about 45%. And Russia is the important trade object of China's energy import.In 2021, about 26% of China's coal, 16% of crude oil and 6% of natural gas imports come from Russia.

In terms of metals, the metals that Russia accounts for more than 10% of China's imports are lead, nickel, platinum, aluminum and copper.In addition, some of China's non-ferrous metals are also highly dependent on foreign countries, among which lead ores account for the highest proportion of total imports from Russia (24%), followed by nickel (18%), platinum (12%), aluminum (12%) and refined copper (11%).

Risk Tips:Geopolitical risks escalated further, and the worsening epidemic affected global trade.