Russia’s invasion of Ukraine in late February and subsequent events have left the rest of the world concerned about potential consequences. Topics such as a humanitarian crisis and economic issues have come to the forefront, as well as the impacts of the war on industry.
The economic sector is still recovering from the crisis caused by Covid-19, which is why experts point out that the war could cause a new economic downturn. Influenced by the export of inputs and price fluctuations, industry will also be affected.
In this scenario, staying prepared for challenges is essential to reduce the negative impacts caused by the conflict. Read on and discover what changes to expect in the industrial sector!
What are the possible impacts of the war on industry?
First, it is necessary to contextualize that Russia and Ukraine are very relevant countries for Brazil’s exports and imports. The increase in the price of raw materials such as oil, iron ore, steel, aluminum, and wheat generates impacts on the value of various products in our country.
Issues such as the rise of the dollar also influence the economic crisis. This is because, if inflation is not reduced, there will be an increase in the Selic rate in Brazil, resulting in higher interest rates.
Industrial production is impacted as the cost of transportation and inputs rises. See below in more detail about the challenges expected for certain industry sectors:
Automotive Industry
The automotive industry is expected to be one of the affected segments, because in addition to the increase in the price of oil — which is used to manufacture various parts — Russia is responsible for 40% of the global supply of palladium, a material used in catalysts and converters.
Given this, research concluded that around 2.6 million automobiles will not be manufactured worldwide in 2022. This drop is also expected to affect Brazil.
Food Industry
The shortage of ships and the challenges faced in international demands hinder the transit of food and inputs.
According to Abrafrutas, in 2020 Brazil paid US$ 4,000 to ship a container of fruit to the US. In 2022, the expectation is that it will cost US$ 11,000.
Furthermore, it is worth emphasizing that Russia ranks 1st in the world wheat production ranking and Ukraine ranks 4th. Another factor that must be taken into consideration is Russia’s importance in fertilizer production; the country is also the largest producer of this product in the world.
Technology
Following the invasion, Kiev, the Ukrainian capital, suffered many cyberattacks on the country’s databases. As a result, several technology companies had to suspend their operations locally.
Many tech multinationals that had headquarters in Ukraine exported their data elsewhere to prevent leaks and information deletion by hackers.
Technology companies are also seeking to evacuate their employees, but local access is limited. Tech giant Google, for example, had more than 200,000 employees working in Ukraine when the invasion occurred.
There is concern regarding the leakage of information shared between different countries, and for now, the scenario is one of monitoring. Several companies have reinforced security policies for their users.
How to overcome war obstacles in industry?
There is no denying it, there are major challenges ahead for the industrial sector. But in this disruptive and unpredictable scenario, companies that manage to create an innovative and digital mindset will come out ahead.
This ensures that processes do not become obsolete and the supply chain will always be ready to respond faster to new needs.
Existing solutions driven by technological advancement can be great allies in this time of uncertainty. The union between the real and virtual worlds creates a safe environment for industries to test new ideas and solutions, preventing failures during the production process.
It is imperative to maintain a flexible planning that covers various factors and paths, as much can change as the war progresses. The real impacts can only be understood once we know the duration of the conflict.
Therefore, it is essential to work with a data-driven process. Automating indicators and having a consolidated production history will ensure greater assertiveness for future decision-making. Thus, processes are not solely hostage to memory or hypotheses.
Signed by: Aloisio Arbegaus – Commercial Director at Teclógica
