Stainless Espresso: Diversification, learnings from pandemic and politics
Stainless Espresso: Diversification, learnings from pandemic and politics

1 March 2022 – Purchasing raw materials and intermediate products is once again facing new challenges. What does that mean now and how do you deal with it? Renewable energies face further investment push. Chip manufacturers stop sales to Russia.

Diversification: Lessons from Pandemic and Politics

Diversification has been an important topic not only since the pandemic began in early 2020. Especially the political developments of the last few months, which have now resulted in extensive sanctions and new logistical and economic challenges, bring diversification back into focus.

When suppliers suddenly disappear

If we look in the direction of the Commonwealth of Independent States (CIS) and Ukraine, the first steel producers there have already had to adjust, shut down or stop their production. According to current market information, this poses challenges for Italian re-rollers, for example, as important suppliers have been lost.

China alone, no longer an alternative

Pandemics, domestic demand and market protection measures have shown in the last two years that China cannot always serve as a dealer for all the West’s needs. The magnesium crisis in autumn 2021 alone has shown that sourcing strategies that rely on a single country of origin for more than 90% of their supply cannot be effective.

Diversification: Sourcing in a changing world

Europe and the United States are dependent on imports. Not only since the pandemic and new sanctions, but also to meet the challenges of the green transformation and energy supply. Many important raw materials and intermediate products come from overseas and can only be procured there in the necessary quantities because Europe in particular ran out of them a long time ago.

Learning: Start diversification now

It is time to diversify the purchase of raw materials and intermediate products more strongly in order to be able to react better to logistical, economic and political challenges. Individual manufacturers can drop out of the process chain overnight. Diversification is a process that is better started sooner than too late. Adapt now and you will be prepared for tomorrow.

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Renewable energies on the horizon for an investment boost?

Renewable energies promise lower and more stable energy prices, as well as greater independence from oil and gas from abroad. Accordingly, the current developments could lead to intensified efforts for the energy turnaround in Europe. Investors already seem to be anticipating this: Shares in the thematic area have gained 15 per cent since Wednesday.

In the short term, however, it is important to note that governments could again intervene in the energy market to relieve their citizens from high energy costs. Therefore, shares of producers of needed technologies – such as wind turbines, solar cells, electricity storage, electrolysers and cables – could be more interesting than shares of renewable energy producers. And will lead to a corresponding increase in demand for the necessary raw materials and intermediate products, such as electrical steel, stainless steel, aluminium and copper.

Do sanctions give room to carmakers?

Several semiconductor manufacturers, including Intel, AMD and the Taiwanese manufacturer TSMC, have stopped their sales to Russia in response to the sanctions imposed by the current crisis. Although there could be delays in Russian palladium deliveries in return, this may be an opportunity for Western carmakers in Europe and the United States to further alleviate the chip shortage and increase production again.

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