What is the impact of the Russian-Ukrainian war on the global energy and chemical industry?

March 1, 2022
March 1, 2022 Longchang Chemical

What is the impact of the Russian-Ukrainian war on the global energy and chemical industry?

Prices of bulk products such as petrochemicals will rise for sure.

The economic sanctions imposed on Russia by European and American countries can take advantage of the situation to reduce the pressure on China and promote further deepening of cooperation between China and Russia. For example, the large oil and gas order just signed will better promote the strategic integration of the Belt and Road Initiative. Chinese chemicals enter the European market more smoothly.
It is difficult for the second line of Beixi to be put into use smoothly. At the same time, the natural gas pipeline passing through Ukraine is also greatly affected. These will inevitably raise the premium of European natural gas and cause global energy prices to rise. In summer, the demand for natural gas is reduced, and if the Russian-Ukrainian war continues into the winter, this will have a more serious impact on Europe.
Russia reduced gas shipments to Europe via Ukraine by two-thirds in January 2022, European gas storage is low, winter demand is 30% higher than the rest of the year, liquefied natural gas (LNG) exports to Europe so far in 2022 The volume of LNG in Europe is at a record high, and European LNG is operating at full capacity. UK gas prices could quadruple in the event of a conflict, while Russia supplies 20% of the global seaborne ammonia market, supply disruptions could impact fertilizer and food prices and demand, but chemical companies will struggle to pass on higher costs, hurting profit margins. Closing the Druzhba pipeline will cut European ethylene capacity by up to 11%, propylene capacity by 12%, lower demand growth in Asia, a slowdown in China, and already negative polyethylene (PE) margins in Asia.
In 2021, my country’s energy and chemical import and export trade volume will reach 860.08 billion US dollars, a year-on-year increase of 38.7%. On the one hand, costs have increased due to the sharp rise in raw material prices, and on the other hand, after the European and American countries were affected by the epidemic, the import and export business still did not recover, and some markets were acquired by Chinese companies. Third, my country’s adherence to the policy of stabilizing foreign trade is continuing to make efforts, and domestic industrial upgrading has improved the overall competitiveness of products.
With the outbreak of the war between Russia and Ukraine, the geopolitical crisis has become more and more prominent, and commodity prices are bound to rise further, and the rise in commodity prices will continue to lead to increased inflationary pressure. The most direct impact on my country’s energy and chemical trade should be the United States. Increase the intensity of interest rate hikes. The interest rate hike will definitely benefit the export of my country’s energy and chemical products.

 

 

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