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

11 May 2022

Raw Materials

The problem of raw materials supply in Europe is not new and different initiatives have been taken at EU level to mitigate the raw materials dependencies over these last years. But the war in UA and its consequences have exacerbated some raw materials shortages or price increase, which has consequences on EU industries and companies’ supply chains (see the different sectors in Ukraine monitor).

Impact on the supply of raw materials

1. The impact of the war in UA is still under investigation for several mineral raw materials and is characterised by uncertainties. Russia is a major supplier of mineral raw materials (palladium, vanadium, titanium, and nickel) used for the digital (3D printing) and green transition (hydrogen, electric vehicle batteries). These raw materials have not been formally covered by any specific sanction, but there is a significant increase in their prices, mainly on the back of supply concerns.

2. Trade flows between Russia and EU show the import dependencies (source: Eurométaux)Even if there are no official sanctions for some key raw materials, some companies are “self-sanctioning” themselves and envisage or have decided to stop imports. The situation is evolving each day in one way or another.

   For information:

   • Nickel: Russia covers 22-30% of EU needs and even more as some refineries in Europe are Russian (Nornickel in Finland) + Norils + BASF (DE) on cathode maker => was a key pillar in DE battery and EV (lithium-ion battery)
   • Alumina: 35% of annual alumina needs in EU are supplied by Russian owned production facilities. Aughinish in Ireland is owned by Rusal.
   • Aluminium: 15% of annual metal needs supplied by Russian primary smelters
   • Coppers: 3,2%
   • Palladium/ Platinium/ Rhodium (>electrolysers of hydrogen/ EV)

3. Situation in Ukraine

   Ukraine is a major supplier of graphite, titanium, nickel, manganese, magnesium, but also iron and steel. In 2021, the EU and Ukraine signed a strategic partnership on raw materials, with the objective of diversifying, strengthening, and securing both sides’ supply of critical raw materials. The European Union had a clear objective to better integrate Ukraine’s raw materials in the EU battery value chains.

   At the beginning of the war, exports were impacted and the EU is currently investigating the way in which it can help to supply Ukraine with key raw materials needed during this wartime period.

Impact of rising energy/commodity prices

The increase in gas prices, exacerbated by the war, has a huge impact on the sector: a significant percentage of Europe’s primary aluminium and zinc capacity was temporarily offline before the war and serious concerns are mounting about further curtailments, and the risks of permanent closures are clear.

Soaring metal prices (aluminium, nickel, palladium, iron ore) and higher energy prices are leading to a cost escalation that may impact sales and inflation in Europe.

Social impacts of sanctions (e.g. companies’ liquidity, wage payments)

No specific impact of sanctions on workers have been reported at this stage, but more time is needed to make an assessment.

Additional impacts worth mentioning

• Russia’s share of global production: impact on global supply chains
• Palladium, 41%, #1 world producer
• Vanadium: 20-25%, #2 world producer
• Antimony: 20%
• Platinum: 12%, #2 world producer
• Nickel 10%
• Gold: 10%
• Selenium & tellurium: 5% & 10% respectively
• Lead: 7%
• Aluminium: 6%
• Silver: 5%
• Copper 4%