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eurocarne magazine interviews amec alimentec about How is the war in Ukraine affecting companies associated
April 21, 2022

 

How is the war in Ukraine affecting companies associated with AMEC (of capital goods and machinery, and food technology and ingredients)? If it is affecting them, what measures are being put in place to alleviate these effects?

 

The companies of amec alimentec are affected by the conflict for different aspects, and they foresee a greater affectation throughout the year. The aspects that they believe will affect them in the immediate future are: rising energy costs, material and component costs, slowdown in the European economy and slower delivery times.

 

Also, many industrial companies in the sector sold or had productive subsidiaries in these countries, which have been forced to temporarily freeze activity. Some are still looking for alternatives, such as accessing the Russian market through some other country of the Eurasian Economic Union, taking advantage of the common market, to continue with trade considering sanctions and dual-use material. But the vast majority are waiting for a change in the conflict or find that clients have completely stopped investing.

 

In addition, Spain exports many processed and semi-processed food products, both in Russia and in the Ukraine, which will affect industrial companies in the sector, which will notice how their customers decrease their sales volumes.

 

The expulsion of Russia from the SWIFT financial system complicates all monetary transactions, which has forced companies in the sector to review contracts and payment clauses to see through which financial institutions they are made, to verify that they are not among those sanctioned, and to choose non-Russian banks, since no European bank operating in Russia has been sanctioned.

 

Is there a problem of shortage of raw materials and equipment?

 

There was a problem of shortages long before the conflict and it is expected that these delivery periods in the countries of Eastern Europe and Asia will begin to extend since an important exchange enclave such as the Black Sea will be difficult to use.

 

In addition, we have the issue of cereals and wheat. Ukraine is the main producer of cereal and wheat in the world, and several countries depend directly on Ukraine, such as Lebanon, Libya, Yemen, etc., countries in which the majority of daily Kcalories depend on cereals and their derivatives. The conflict is paralyzing Ukrainian exports and it is believed that, if the situation continues like this, there may be shortage problems in these countries. However, even if we do not reach this extreme point, what is certain is that foods that depend on cereals or wheat will suffer a sharp rise this year, and all foods in general. Also, coincidentally, the second and third largest grain exporters are Russia and Kazakhstan, which are either involved in the war or have lost their way through the Black Sea, so they cannot replace Ukrainian exports either, causing product inflation. that will directly affect industrial companies.

 

Another of the pressing problems is the increase in energy prices. By how much are prices estimated to have risen? How does it affect them?

 

The situation that we all know is the huge rise in the price of energy, especially electricity and gas.

 

This price increase, unfortunately, will not stop in the short term, neither in the energy sector nor in the others. According to experts, in January-February we will be at 10% inflation in Europe and the United States, a very high inflation. In some sectors, such as fuel or energy, this inflation will be much higher, as is already being seen, but on average we would speak of 10%. This happens because the demand that we currently have is much greater than the supply, and it is true that supply has been reduced and in part this generates this distortion between supply and demand, but the big problem is the incessant increase in demand, fueled by expansionary fiscal policies around the world. In fact, we are in a situation like that of the 1970s, with the oil crisis, and we are gradually heading towards a situation of stagflation, like the one experienced in those years. For those who are not familiar with the term, stagflation is that economic situation in which, within an inflationary situation, there is a stagnation of the economy, but inflation does not stop rising. It is one of the most dangerous types of economic crises that exist.

 

All this will lead to an increase in the price of production and transportation, which will affect the entire production chain. The problem is that not all of them can transfer it to the price of the product because they have closed contracts with clients.

 

With all this information, almost 50% of the amec alimentec companies have made a downward revision of the results of the next financial year and of the volume of business.

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