Russian invasion of Ukraine could affect North American metal fabrication and forming companies.eltoro69/iStock/Getty Images Plus
The Russian invasion of Ukraine will affect our economy in the short term and is expected to have a significant impact on the formed sheet metal industry.Political uncertainty and economic sanctions will still affect the global economy even if the attack is de-escalated.
While no one knows what will happen, managers and employees need to observe the situation, anticipate changes, and respond as best they can.By understanding and responding to risk, each of us can have a positive impact on the financial health of our organization.
In times of crisis, global political instability affects oil prices almost as much as supply and demand issues.Threats to oil production, pipelines, shipping and the structure of the market drive oil prices higher.
Natural gas prices are also affected by political instability and the potential for supply disruptions.A few years ago, the price of natural gas per million British thermal units (MMBTU) was directly affected by the price of oil, but changes in markets and energy production technology have affected the decoupling of natural gas prices from oil prices.Long-term prices still seem to show a similar trend.
The invasion of Ukraine and the resulting sanctions will affect gas supplies from Russian producers to European markets.As a result, you can see a significant and ongoing increase in the cost of energy used to power your plant.
Speculation will enter the aluminum and nickel markets, as Ukraine and Russia are important suppliers of these metals.The supply of nickel, already tight to meet demand for stainless steel and lithium-ion batteries, is now likely to be further restricted by sanctions and retaliation measures.
Ukraine is an important supplier of noble gases such as krypton, neon and xenon.Supply disruptions will affect the market for high-tech equipment that uses these noble gases.
Russian company Norilsk Nickel is the world’s largest supplier of palladium, which is used in catalytic converters.Supply disruptions will directly impact automakers’ ability to develop products for the market.
On top of that, disruptions in the supply of critical materials and rare gases could prolong the current microchip shortage.
Supply chain failures and surging demand for consumer goods are adding to inflationary pressures as COVID-19 has weighed on the domestic economy.If the Fed raises interest rates to address these concerns, demand for appliances, cars and new construction could slow, directly impacting demand for sheet metal parts.If suppliers are still unable to meet or even fall in demand, consumer prices will rise sharply.
We are living in stressful and challenging times.Our choice seems to be to lament and do nothing, or take action to manage the intrusion and the negative impact of the pandemic on our company.In most cases, there are steps we can take to reduce the energy needs of our stores, which may also improve production results:
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