The war accentuates the reorganization of supply chains

“It will take some Western countries many years to find or develop alternatives for many Russian commodity exports,” according to National Bank analyst Angelo Katsoras. (Photo: 123RF)

The war in Ukraine is accentuating the recomposition of global supply chains that began with trade tensions between China and the United States, says the National Bank in a geopolitical note.

Geopolitical analyst Angelo Katsoras points out that several companies had already diversified their supply chains and repatriated production from key sectors in order to no longer depend on geopolitical rivals for critical goods due to Sino-American tensions, which began under the administration. Trump.

“Russia’s invasion of Ukraine will accelerate these trends,” the analyst writes.

To illustrate the reconfiguration of supply chains that will result from the recent sanctions against Russia, Angelo Katsoras gives the example of the restrictions imposed by the United States on the ability of Russian companies to buy computer chips (or semi-conductors ), advanced technology machinery and aeronautical components.

However, these measures do not only apply to goods produced in the United States, but also to all those manufactured in other countries using American technology, underlines the analyst, citing an analysis of the British magazine The Economist.

Consequently, Canadian manufacturing companies could be affected by these sanctions.

“China will no doubt be quick to replace the United States in some of these sectors, but it does not yet know how to produce the latest generation semiconductors or can not supply spare parts for Western-made aircraft. “, points out Angelo Katsoras.

1649385807 580 The war accentuates the reorganization of supply chains

China does not yet know how to produce the latest generation semiconductors. (Photo: 123RF)

Furthermore, he underlined that the return to more stable global supply chains could take some time, and that companies sourcing from Russia will have to be patient, especially with raw material purchases.

“It will take some Western countries many years to find or develop alternatives for many of Russia’s raw material exports, especially in the minerals sector,” he says.

However, it takes more than 16 years on average to bring mining projects from discovery to production, according to a analysis published in May 2021 by the International Energy Agency (IEA).

In fact, the entire world economic order of recent decades is changing before our eyes, if we take a step back to analyze the economic forces present and in motion.

“The war in Ukraine is accelerating the creation of two large economic blocs destined to become less dependent on each other. One under the leadership of the United States, the other led by China,” explains the National Bank analyst.

Russia will join the bloc associated with China

For its part, Russia will have no choice but to join the economic bloc of China, “as a second-class partner and to adopt its rules and standards”, according to the geopolitical analyst.

It goes without saying that this will have an impact on the supply costs of Canadian companies, because some of them will no doubt have to operate in these two economic blocs in order to be able to sell their products there.

“Repatriating some supply chains will eventually help in this regard, but producing components in multiple locations for regional markets will reduce economies of scale and increase costs,” says Angelo Katsoras.

The establishment of these two competing economic blocks also risks particularly penalizing companies that have developed strategic and highly demanded technological innovations.

“In this new context, companies belonging to sectors deemed to be strategic will increasingly risk losing access to markets located in competing economic blocks, as each zone develops its own capacities”, warns the analyst.

We would like to say thanks to the author of this write-up for this amazing web content

The war accentuates the reorganization of supply chains


You can find our social media pages here and other related pages herehttps://metfabtech.com/related-pages/