War in Ukraine disrupts key supply chains - and lives

AP , Tuesday 15 Mar 2022

It can be hard to measure the ways that Russia's war in Ukraine has disrupted the global supply of parts and raw materials needed to complete a variety of products - from cars to computer chips.

Wheat field, Russia
Farmers harvest with their combines in a wheat field near the village Tbilisskaya, Russia, July 21, 2021. AP

But cutting off one of those supply links brought a ``depressing feeling'' to Andrey Bibik, head of the Interpipe steel plant in Dnipro, Ukraine. He spent the first hours of the war winding down his bustling 24-hour operation and sending almost everyone home.

``It's empty and lonely. You don't hear a sound. You see everything is frozen,`` he said.

Getting Interpipe's steel transmission pipes to Texas oil companies and its railway wheels to European high-speed train operators has been put on hold. Hundreds of the plant's roughly 10,000 employees have joined the fight against Russia. Others have fled; a remaining skeleton crew runs its canteens and makes spikey metal obstacles to block Russian tanks and convoys. Its bomb shelters house dozens of local families at night.

``It was a hard choice to stop production. We had plenty of orders, a lot of customers awaiting our material. But if you have to choose between safety, and possible profits, I think the answer is obvious,'' said Bibik, who's worked at the company for nearly two decades. ``The most important thing we have is life and we really need to take care of the people we love.''

Similar production halts have spread across other industries in Ukraine, motivated not just by safety concerns but also because the war and mass exodus of refugees have closed off roads and railways to commercial freight traffic. Some of Interpipe's finished products bound for overseas export are now stalled at the Black Sea port of Odesa.

Ukraine accounts for only about 0.3% of the world's exports, while Russia's share is about 1.9%, according to a report by the Dutch bank ING. Still, some industries doing business with these nations are starting to feel the war's impact.

For Russia, a key producer of energy, steel and raw metals such as nickel, copper, platinum and palladium _ many of which are important to the auto industry _ the supply concerns are tied to punishing Western economic sanctions and Russia's moves to retaliate against them. For Ukraine, the war itself is cutting off supplies.

``We want to give priority to the refugees, people trying to move out of the war zone, and humanitarian and military convoys,'' said Interpipe's Houston-based chairman and former CEO Fadi Hraibi.

The disruption of another Ukrainian industry _ the making of wiring harnesses used in cars _ is already hurting European automakers. Ukraine has more than 30 automotive plants, most of them centered near the western border with Poland and other European neighbors, according to a government agency that promotes foreign investment.

German parts supplier Leoni said production has been interrupted at its two western Ukraine plants in Styri and Kolomyja and that it's looking for temporary alternatives. ``We are aware that this situation is currently affecting not only Leoni, but the entire industry,'' said spokesperson Gregor le Claire.

Ukraine is also among the world's largest suppliers of neon, a gas used in lasers that help etch integrated circuits onto computer chips. That worries auto industry executives, who fear that tight neon supplies could worsen a global chip shortage that has already forced production cuts and made vehicles scarce worldwide.

Interpipe has five factories in Ukraine, all located in the industrial hub of Dnipro and its surrounding oblast, or region, which holds a strategic position on the Dnieper River southeast of the capital, Kyiv.

Until Russian airstrikes began targeting Dnipro on Friday, the country's fourth-largest city had been mostly quiet _ except for occasional air raid sirens _ in the two weeks since Russia invaded the country. But executives at Interpipe made a quick decision on Feb. 24 to shut down all of its facilities.

Russian President Vladimir Putin launched the invasion before dawn and by lunchtime, plant operations were wound down, Bibik said. That evening, he watched the last five workers get shuttled off to the suburb where they live. All of Interpipe's workers are still being paid, Bibik and Hraibi said.

Interpipe's customers in the energy and rail industries typically order their pipes, wheels and other products months in advance, but Hraibi said the disruptions will cause shortages and lead some to look for alternatives. For some wheel customers, such a Saudi Arabian railway operator, Interpipe is the sole supplier, he said. Two of the company's chief steel industry rivals, OMK and Evraz, are in Russia and he hopes customers will avoid them.

``I don't know if our business will survive,`` he said. ``We do all that's necessary to support the people, to keep our employees, to be able to restart in a month or two or three, whenever things get back to _ at least closer to _ normal. But in reality, nobody can predict what's going to happen.''

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