War leads to much unrest. People who are directly affected are worried about their health and life, but that's not all. Today's world resembles a system of communicating vessels and the fact of the Russian invasion is widely echoed in other areas, such as industry and business.
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From the beginning of hostilities on the territory of Ukraine, we have devoted a lot of space to supply chains. They had not yet managed to recover from the pandemic period, and had to face new challenges. Shaky supplies are currently one of the most serious problems of industry and broadly understood business, but not the only one.
Chinese magnesium
This is how we come back to semiconductors. Their lack on the market is nothing new. We wrote about it extensively in Automation Trader in November last year, when the Chinese decided to reduce production in magnesium smelters. As they account for 85 percent of the metal's total volume, it is no wonder that the global markets reacted very nervously and magnesium prices soared.
All because of the huge share of magnesium in the production of semiconductors, which are used in many different industries. The very serious situation was evidenced by the reaction of the European Commission, which announced through the mouth of Eric Mamer that it was negotiating with the Chinese to remedy the shortage problem. - We are conducting talks with our partners from China, which will allow us to work out long-term plans - he said. - Failure to solve this problem threatens thousands of companies across Europe, as well as supply chains and - most importantly - millions of jobs. The consequences can be catastrophic - he added.
Today, neon joins magnesium, and all because of Russian aggression. The war has been going on in Ukraine for several weeks, and it just so happens that the country is currently responsible for half of the world's supplies of this raw material. Specifically, there are two companies - Cryoin and Ingas, which according to various estimates provide up to 54 percent of the total volume of neon available in the markets.
Ukrainian neon
The aforementioned companies had to stop their activities. Ingas, whose headquarters is in Mariupol, which suffered heavy losses due to Russian air raids, was particularly hard hit.
The problem is of course fresh, but Reuters is already alerting today that if there is not a cease-fire across our eastern border soon, we will all feel the lack of neon. While the largest manufacturers have their stocks even for several months, the shortage will certainly affect the production of semiconductors, and then all devices that need these components to function.
So the automotive and electronics industries will suffer, and all this will ultimately translate into a longer waiting time for products, as well as their final prices. This is not surprising, however, especially in view of what happened in Ukraine over seven years ago.
At that time, our neighbor also had to deal with the Russian aggression. It concerned the Crimea, Donetsk and Luhansk, but it still had a huge impact on the global prices of neon. How huge? It is enough to go back a bit in time and see that the cost of purchasing raw materials in the markets increased then by over 600 percent! Today, when the turmoil of war has engulfed the whole of Ukraine, increases at even higher levels can be expected.
