Reports indicate that the Ukraine conflict will cause critical building material shortages and price rises that will have a detrimental knock-on effect on the global supply chain
Global supply chains have already fallen significantly for the 12 months prior to the Ukraine conflict, raising concerns over prolonged building material shortages and price rises, according to a new report published today.
Oil and gas supply constraints continue
- A further reduction in supply chain resilience score to 44.9 in Q4 2021.
- ASCR Index now only marginally above the 40% high-risk threshold.
- Building material shortages for key items will continue to impact downstream supply chains.
- Increases in commodity prices continue and significant price volatility expected as a result of the Russia-Ukraine conflict.
- Medium-term oil and gas supply constraints continue to impact a range of sectors, and in the current geopolitical climate may fluctuate wildly.
- The semi-conductor shortage continues to have a major impact, with a knock-on impact on the transition to green energy as the electric car and renewable energy storage industries compete for a limited supply of lithium as a critical component.
Shortage of raw materials to hamper global trade
The shortage of raw building materials such as tin – a key component of circuit boards – molybdenum, a trace mineral used in energy creation, defence products, and new applications powering electric vehicles, alongside other materials such as nickel, zinc, copper, oil and gas, are expected to impact downstream global supply chains and hamper global trade.
Lithium – a material essential to the production of batteries for electric vehicles and electrical storage – is particularly scarce and could see up to 20 million electric vehicles taken out of production between 2022 and 2029.
In the short term, competition for lithium is likely to see the global transition to a renewable energy system come under pressure dramatically as car manufacturers and battery producers compete for the same supply.
‘2022 would be a rocky road for global supply chains’
Katie Tamblin, author of the report and chief Product officer at Achilles, commented: “Supply chain data emerging from Q4 2021 was already indicating that 2022 would be a rocky road for global supply chains, and now with the additional conflict in Ukraine, the outlook is extremely concerning.
“The Achilles Supply Chain Resilience Index (ASCRI) has, throughout the whole of 2021, flagged commodity prices and energy supply as bellwethers for global supply chains.
“Pummelled by so many challenges over the last two years, supply chains have not had time to recover, and we now face a critical tipping point that could have both supply and cost ramifications rippling through industrial and consumer markets for years to come.
“Now is the time to practice the lessons of the pandemic, and as we emerge into a new world order, use data to inform purchasing decisions. Our data shows that to weather this crisis, organisations need visibility across their supply chains to identify vulnerabilities and alternative sources of supply.”