Ukraine Monitor

economic and social impacts

Views/information on resilience or disruption of supply chains due to the Russian invasion in Ukraine and various sanctions

14 June 2022

Mechanical Engineering

The EU sanctions against Russia include

• A ban on transport equipment to Russia
• A ban of Russian and Belorussian freight road operations working in the EU

Austria

Russia is the tenth most important country receiving exports from the Austrian metal industries. Exports to Russia have been declining for decades.

The most important goods imported from Russia are aluminium, nickel and steel. Imports were already declining in 2021 as well.

The most significant goods to be imported from Belarus are iron wire and bar steel. Imports from Belarus are also declining.

The Austrian industry expects a total stop of exports to Belarus, Russia and Ukraine, not only due to sanctions but also due to logistical problems. This will likely shrink the growth of the metal industries in 2022 by 1-2%.

The fifth package of sanctions against Russia now stretches to cranes, construction machines and paper machines. Due to the logistical problems that were already present before the package, this will not change very much for the Austrian industry.

Companies report a positive situation. Assessment of the situation improved in March-April by 5%.

84% of the companies consider their order situation as “sufficient” or “more than sufficient” (March: 82%).

39% of the companies report no problems with regard to their business activities, 45% report staff shortages, 9% report capacity bottle necks.

Source: Fachverband Metalltechnische Industrie, Österreich - Gewerkschaft PRO-GE

France

The sector had a strong first quarter and the activities in the sector have increased. Like the overall economy, the sector is suffering from a strong rise in consumer prices.

The upswing is partly due to strong domestic demand, which is growing faster than export orders.

Supply is mainly hampered by a strong increase in material prices.

Foreign order books were well filled before the war, but this is likely to change in the next months.

Germany

German Industry Association VDMA reported that orders in April were down by 4% compared to March, due to the break away of the Russian and the Ukrainian market. Also investors from other countries are hesitating to invest in the current situation.

In addition to that, the current lockdown in Shanghai has led to interruptions in the supply chain.

VDMA expects the German machinery sector to grow by 4% in production in 2022. Before the war, they projected the sector to grow by 7%.

German Employers’ Organisation Gesamtmetall reported that 69% of their members expect a rise in costs with regard to purchases. Roughly 50% expect significant slumps in turnover and profit. One third of the companies were not yet able to give reliable indications of the repercussions of the war on their business.

Most of the companies that have cut their business ties with Russia reported that it is difficult for them to find new suppliers. Significant supply chain ruptures will hamper the industry. Iron, steel and energy supply are particularly vulnerable parts of the supply chain. 38% of the companies with significant imports from Belarus,Russia or Ukraine estimate that it will be difficult for them to substitute for the missing supply.

Sweden

SKF has decided to exit Russia - The intention is to divest the business in a controlled manner with the clear ambition of ensuring a future for SKF’s employees in Russia.