War in Ukraine
Without a quick end to the conflict on the horizon, the effects of the Russian invasion of Ukraine are being seen in equities, energy, global trade and commodities markets.
Published: January 31, 2022
Updated: July 25, 2022
Join S&P Global for a comprehensive analysis of varying Russia/Ukraine conflict scenarios during a period of economic uncertainty. Paul Gruenwald, Global Chief Economist, S&P Global Ratings will outline key macroeconomic observations and the possible paths the conflict could take.
ACCESS THE REPLAYEurope’s Energy Supply
Gas and power prices jumped after news that Gazprom was cutting gas flows via the Nord Stream pipeline to 40% of capacity. How will prices respond if Russian gas supply to Europe remains constrained and what does this mean for the EU's gas storage capacity goals?
Gazprom has so far cut off six buyers of Russian gas that did not comply with the ruble payment requirement. What can these countries do to replace the lost Russian volumes and how will it affect supply security?
Europe's New Trade Flows for Coal Shaping Up as Import Ban on Russia Looms
With the flow of Russian coal to Europe coming to a final end, buyers jostling for alternatives are increasingly in favor of tapping non-traditional markets, a development many believe, for better, will likely lead to the creation of new trade flows for the fuel.
Read the Article'Disentangling' the Global Nuclear Fuel Supply Chain After Russia's Invasion of Ukraine
In the world of nuclear energy, things rarely move quickly. Nuclear power reactors often take 10 years or more to license and build, and then can operate for six or more decades.
Read the ArticleRussia Set to Meet Just 25% of EU Gas Demand in 2022: IEA
Russia is expected to meet just 25% of EU gas demand this year, its lowest level in more than two decades, the International Energy Agency said July 5.
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SUBSCRIBE TO OUR NEWSLETTERSFinancial Market Pressures
Ukraine's banking sector recorded consecutive months of deep losses and elevated provisions for bad loans as the impact of Russia's invasion on the country's lenders becomes increasingly clear.
Aggregate profitability in the sector fell to a loss of 7.27 billion hryvnia in April from a profit of 7.15 billion hryvnia in January, the latest data from the Ukrainian central bank shows. Return on equity fell to negative 9.46% from 33.3% over the same period, while loan loss provisions rose to 15.86 billion hryvnia in March from 1.58 billion hryvnia in January, with a further 11.17 billion hryvnia added in April.
Ukrainian banks are maintaining their day-to-day operations where possible, but the conflict is negatively affecting business and household income, said Vitaliy Vavryshchuk, head of macro research at asset manager Investment Capital Ukraine. This could make it difficult for borrowers to keep up with loan repayments, Vavryshchuk said.
"The key risk is impairment of the loan portfolio. The most likely scenario is that nearly all corporate and retail loans in the territories that are still occupied will be lost," Vavryshchuk said. Destruction of tangible assets due to missile strikes and shelling was another source of losses, Vavryshchuk said.
Damage assessment
The central bank has implemented a nationwide moratorium on loan repayments to help borrowers, but it still wants banks to properly measure and report their asset quality, a spokesperson for the bank told S&P Global Market Intelligence via email. "Without grasping the full scale of the damage, we will not be able to implement an effective rehabilitation of the banking system post-war," the central bank said.
Total loans in the Ukrainian banking system amounted to 1.1 trillion hryvnia as of the end of March. The nonperforming loan, or NPL, ratio for the sector stood at 27.1%, slightly up from the February level of 26.6%, which was the lowest NPL level for the sector since 2017. Because loans are only classified as nonperforming once payments are more than 90 days overdue, the full extent of NPL exposure is not yet known.
Russian Financial System Increasingly Backed by Commodity Collateral as Default Looms
Russia will increasingly use barter and specific currency transactions for energy supplies, an S&P Global Commodity Insights analyst said May 24, as a default looms for billions of dollars in foreign currency reserves if the U.S. allows a key waiver to expire May 25.
READ THE ARTICLEG20 Members’ Views on Russia Diverge, Making Expulsion Unlikely
Russia's expulsion from the G20 is unlikely, with most members either against removing Russia from the group or undecided on the matter.
READ THE ARTICLESubnational Economic Spill Over Effects After Russia’s Invasion in Ukraine
Russia's invasion of Ukraine has caused several spill over effects, which for European economies are having an uneven impact at both the country and the subnational level.
READ THE ARTICLEThe Russia-Ukraine Conflict: Beyond the Nearer-Term Implications
With the invasion of Ukraine on 24 February, Europe's security environment, Ukraine and Russia's economic outlook, the stability of markets have been thrown into the air and are in the process of reshuffling.
READ THE ARTICLEEU's Russian Ships Insurance Ban to Distort Commodities Trade: Sources
The European Union's ban on insurance and reinsurance of Russian ships is expected to further complicate trade in dry bulk and liquid commodities with Russia.
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The Russian invasion of Ukraine has not only initiated a global humanitarian crisis, it’s given rise to greater risk exposures in capital flows, trade and commodity markets worldwide. Our experts are sensitive to the effect of the conflict on global economies as well as its impact on our community in deep and varied ways.
READ MOREChina's Evolving Role
The weaponization of the US dollar against Russia after its invasion of Ukraine has raised expectations that Beijing will accelerate its de-dollarization efforts, to protect against similar financial sanctions that Washington could deploy against China (mainland). While the Chinese renminbi (RMB) is unlikely to dethrone the US dollar in the global financial system soon, concerns remain that the dollar's weaponization against Russia has initiated an irreversible fracturing of the global financial system that will result in two international monetary systems, one led by the United States and one by China.
Markets Brace for Oil, Gas Demand Destruction as China Pursues Zero-COVID Policy
China's ongoing COVID crisis is one of the key events driving commodity markets.
View the InfographicKey China-Russia Oil and Gas Deals, Joint Projects and Energy Investments
Energy supply diversification to China has been at the core of Russia's eastern pivot, while Russian gas is central to China's energy diversification away from the Middle East and Australia.
READ THE FULL ARTICLELow-Priced Russian Urals Crude Cargoes Attract Chinese Buyers for June Deliveries
Several Chinese state-owned refiners have returned to the Russian spot market to buy May-loading Urals crude barrels, attracted by their record discount to Dated Brent, refining sources told S&P Global Commodity Insights March 22.
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Sanctions Against Russia
Russia's invasion of Ukraine triggered an unprecedented wave of sanctions against Moscow which are still rippling through global commodity markets.
In addition to official sanctions which continue to evolve, major self-sanctioning by industries looking to cut ties with Russia have deepened the market impact.
The U.S. and the EU have ramped up sanctions on Russia, including a major hit to traditional oil export markets.
U.S. Treasury Extends Russia Sanctions Waiver for Energy Payments to Dec. 5
The U.S. Treasury Department has extended a key waiver to its Russia sanctions allowing energy-related payments to continue until Dec. 5.
Read the ArticleNew Iran Sanctions Prompt China Independents to Expand Focus on Russian Crude
China's independent refiners may aim to keep potential risk at bay and refrain from taking Iranian barrels in the near term following a new set of sanctions imposed by U.S. authorities, as plentiful availability of discounted Russian cargoes and robust domestic stocks will make it easier to fill the vacuum.
Read the ArticleEU Publishes Sixth Sanctions Package, Including Oil Import Restrictions
The EU published details of its sixth sanctions package against Russia June 3, including phasing out Russian crude imports in 6 months, and other refined products in 8 months.
Read the ArticleRussian Foreign Ministry Says EU Oil Sanctions Will Lead to Further Price Rises
The Russian Foreign Ministry said June 2 that the latest EU sanctions restricting imports of Russian oil and banning shipping insurance, will lead to further price rises.
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In response to Russia’s invasion of Ukraine, S&P Global Ratings continues to assess the effect on economies, markets, and credit.
ACCESS THE RESEARCHEffects on Oil
Russia's war in Ukraine has trigged a major upheaval in the global oil markets, forcing Moscow to find alternative buyers and Europe to source new supplies as Western sanctions seek to clamp down on Moscow's vital oil revenues.
Russian Plants Enjoy Good Fortunes, For Now
Russian refineries are reaping the benefits of state subsidies for domestic production coupled with strong summer demand, but the threat of a tougher winter and a heavier EU sanctions burden now looms.
Read the ArticleJapan's Russian Crude Oil Imports Fall to Zero in June
Japan's Russian crude oil imports fell to zero in June, while its coal imports from Russia were also slashed, as the country commits to phasing out Russian oil and coal imports as part of the G7 pledge, according to the latest preliminary data from the Ministry of Finance.
Read the ArticlePakistan Ponders Russian Crude Imports, Seeks Input from Refiners
The Pakistani government has asked its refineries to provide feedback on importing attractively-priced Russian crude in an effort to soften the blow from a ballooning import bill, joining a list of Asian countries which are keeping their options open to buy from the non-OPEC supplier.
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As the Russia-Ukraine military conflict rages on, S&P Global is continuing to assess the related effects on economies worldwide, the ramifications for financial and commodity markets, and the impact on borrowing conditions and credit quality.
Register NowImplications for Gas
Global LNG cargo prices have moved together in a narrow band in the second quarter while the world's major gas hubs – Henry Hub and the Dutch Title Transfer Facility – are at historically divergent price levels from each other.
Key in bringing LNG prices together is weak demand in North Asia, the world's main consuming region, as well as strong demand in Europe due to the policy pivot towards LNG and away from Russian pipeline gas.
The US FOB LNG market, reflected by Platts Gulf Coast Marker, is moving in sympathy with these two principal demand areas as off-takers seek the best returns for their term cargoes.
Meanwhile, Henry Hub and TTF – the two most-traded gas hubs regionally – remain distant from each other. June 16 – when TTF reached a premium of $29.614/MMBtu against Henry Hub – saw the widest difference since April 4 due to reduced pipeline flows from Russia to Europe and the extended outage at major US liquefaction terminal, Freeport LNG, shutting gas away from the LNG export market.
Ukraine War Triggers Spike in Energy Attacks, Supply Disruptions in H1 2022
Energy security and supply issues have dominated the first-half of 2022 as the geographical spread of attacks on commodity infrastructure has broadened since Russia's invasion of Ukraine, the latest update of S&P Global Energy Security Sentinel research project showed.
Read the ArticleJapan Urges Importers to Accelerate Securing Alternatives to Russian LNG
Japan's Ministry of Economy, Trade and Industry is urging domestic LNG importers to speed up securing alternative supplies to Russian LNG and is also accelerating its own efforts to consider contingency plans, a METI source told S&P Global Commodity Insights on July 7.
Read the ArticleRussian Official Warns of Total Halt to Nord Stream Operations: Report
Any more problems with the maintenance of key gas turbines at the Portovaya gas compressor station in Russia could see the total suspension of gas flows in the Nord Stream pipeline to Germany, a senior Russian official warned June 16.
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Following Russia's invasion of Ukraine, S&P Global Commodity Insights looks at the impacts on commodity and energy markets in the region and the world at large.
ACCESS THE TOPIC PAGEImpact on Metals & Chemicals
Whoever first uttered the expression "May you live in interesting times" must surely have envisioned today's U.S. metals markets.
The saying — part blessing, part curse — is an apt summation of current times. From pig iron to nickel, aluminum to steel, U.S. pricing has soared once again on geopolitical events, supply chain strains, and overall uncertainty.
Just as domestic markets began to stabilize from record price increases in 2021 and the economy was coming to terms with the realities of a post-pandemic world, inflation bit hard in the first quarter of 2022, Russia invaded Ukraine and a new COVID-19 variant emerged.
The combination of factors is roiling markets. Russia and Ukraine's conflict has had the most far-reaching impact.
The two countries accounted for about 62% of American pig iron imports in 2021, and the war has removed significant supply of the key electric-arc furnace steel feedstock for U.S.-based steelmakers and global producers alike. About 70% of U.S. steelmaking is EAF based.
U.S. buyers have had to look to replace Russian and Ukrainian material since the February invasion, with Brazil picking up the bulk of that business. S&P Global Commodity Insights' Platts Brazilian pig iron export assessment nearly doubled from January to mid-March, topping $950/mt in early April.
In turn, Platts CIF New Orleans pig iron price assessment rose about 91% by mid-March — reaching $1,030/mt, the highest level since S&P Global began assessing it in January 2018. The weekly US pig iron import assessment is now down $90 from the recent peak but still elevated.
U.S. Suspends Tariffs on Steel Imports from Ukraine
The U.S. on May 9 suspended for one year its 25% Section 232 tariffs on steel imports from Ukraine, noting the importance of that industry to Ukraine's economy as the country continues to defend itself against Russia.
READ THE FULL ARTICLEU.S. Steel Shifts Raw Materials, Continues U.S. Pig Iron Build Out Amid Russia-Ukraine Conflict
U.S. Steel is continuing to focus on increasing its U.S. pig iron supply, while shifting its raw materials mix domestically and in Europe amid the ongoing war in Ukraine, company executives said April 29.
READ THE FULL ARTICLEJapan Companies Accelerate Move to Replace Russia Coal with Australian Supply, Others
Japanese utilities and manufacturers are stepping up efforts to seek alternative supplies to Russian coal from Australia, Indonesia and Vietnam, among others.
READ THE FULL ARTICLEArcelorMittal Cuts 2022 Global Steel Consumption Outlook Because of Ukrainian War
ArcelorMittal expects 2022 global steel consumption to contract 0%-1% as Russia's military invasion of Ukraine disrupts supply chains, stoking inflation, while China's COVID-19 lockdowns dampen economic activity, the world's second biggest steelmaker said May 5.
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Agriculture
Uncertainty about where the world will get its wheat, as the Ukraine war persists, opens the door for Canada to take on a larger role in ensuring global food security.
The Ukraine war has raised concerns on future export operations from the European region and increased expectations for Canadian exports in marketing year 2022-23 (August-July). This comes after several years of Canada's share of the global export market shrinking amid increased exports from Black Sea producers.
Canada accounts for only 4%-4.5% of global wheat production, but in 2021 accounted for 7.7% of total global exports. Estimates from the US Department of Agriculture's June WASDE report for the next marketing year see that export share jump to 12% of global volume.
It is an understatement to say that Russia has had a big impact on the global wheat market this year – and this looks unlikely to change soon.
Ukraine, Russia Likely to Sign Deal to Resume Ukraine's Grains Exports, Turkey Says
Ukraine and Russia are likely to sign a deal July 22 to resume Ukraine's grains exports from the Black Sea, the Turkish President's office said.
Read the ArticleThe Ukrainian Supply Chain Issue Will Remain the Main Upside Risk to Food Inflation in the Coming Months Even with Significant Increase in Shipments from Danube Ports
Following the inflation and food crisis, there are several discussions on how to export or move the Ukrainian grain, and other cargo. We have already seen a significant increase in shipments from Danube River ports in Ukraine and Romania.
Read the ArticleRussia's Bumper Wheat Exports May Be Capped as Large Vessels Shun Black Sea Ports
As the global leaders fret about food inflation, Russia is preparing to reap one of its largest-ever wheat crops, but the country is likely to show a sharp year-on-year fall in shipments for the first two months of the marketing year as larger vessels avoid the country's Black Sea ports, according to traders.
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As the Russia-Ukraine military conflict rages on, S&P Global Market Intelligence Insights reports on how geopolitical factors and market volatility issues are affecting businesses across all industries at the local, regional, and global levels.
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