‘Import-sensitive’ firms may face supply disruptions amid Russia-Ukraine conflict

By Keren Concepcion G. Valmonte, Reporter

LISTED Philippine firms importing raw materials and other products may be affected by the global supply chain disruption caused by the ongoing conflict between Russia and Ukraine.

However, companies involved in banking, mining, and renewable energy sectors may see opportunities amid the crisis.

“[Companies] who are import-sensitive will take a hit for the short term, there will be a knee-jerk reaction,” First Grade Finance, Inc. Managing Director Astro C. del Castillo said in a phone call on Sunday.

This includes petroleum-related firms, while food manufacturing companies may also be affected “because of the global shocks in relation to the uncertainty.”

Oil prices soared to over $100 per barrel on Thursday, after Russia’s full-scale invasion of Ukraine. On Friday, oil prices dropped as worries over supply disruptions eased.

Reuters reported that wheat prices hit their highest level since mid-2008. Russia and Ukraine are two of the world’s biggest suppliers of wheat. Supply interruptions may push up wheat prices, and in turn food inflation.

Mr. Del Castillo noted the global supply chain, which has already faced delays and other issues brought by the coronavirus disease 2019 (COVID-19) pandemic, may face more constraints due to the war.

“Perhaps the greatest threat of the Ukraine-Russia war would be the threat of higher inflation. Any sector that heavily relies on raw materials to produce goods may be affected by rising inflation,” COL Financial Group, Inc. Chief Technical Analyst Juanis G. Barredo said in a Viber message on Sunday.

Mr. Barredo noted that companies involved in transportation and shipping, food retail, and consumer goods may incur higher production costs brought by the increase in prices of raw materials.

Meanwhile, First Metro Investment Corp. Head of Research Cristina S. Ulang said the war between Ukraine and Russia may benefit firms in banking and mining as well as renewable energy firms.

“Long-term, the renewable energy sector will get a boost given the need to diversify energy sources toward cheaper more available sources and less affected by geopolitical risks,” Ms. Ulang said in a separate Viber message on Sunday.

“On the other hand, banks will enjoy improved loan spreads as interest rates inch up. Greater haven asset demand will benefit gold miners while soaring nickel and coal prices will see an opportunistic [ramping-up] of Philippine exports of these minerals,” she added.

At the same time, Mr. Barredo noted that businesses are still recovering from the strict lockdowns, which “may have eroded some business coffers, limiting their ability to sit through yet another prolonged crisis.”

“We do hope that no direct influence on the Philippines may occur, other than higher oil, food, and transport costs could be seen. This could add some temporary weight and worry into investor sentiment. We do hope though the length of (the conflict) would be limited,” he added.

In case of a prolonged war, Ms. Ulang said the markets will price in the risk of higher inflation and tighter monetary policy “for longer than the prewar expectations.”