After a favorable period of global economic recovery, a geopolitical factor arises -Russia’s invasion of Ukraine- which bursts in causing serious consequences in all aspects wherever it is analyzed, and which forces us to make a “RESET” or restart in all our short and medium term plans

Before the unfortunate events in Ukraine, Europe had serious supply limitation problems in the energy field, especially with regard to Natural Gas. The recovery in demand for final products in 2021 was higher than anticipated, especially in China, which diverted the supply of basic products to China to accompany the growth in demand. This began to impact other regions, which were affected by the limitation of imports, mainly from the Gulf of the United States to the European and Asian markets.

In this context, a tragic geopolitical factor arises -Russia’s invasion of Ukraine-, which erupts causing serious consequences in all aspects where it is analyzed.

Regarding commodities such as Wheat, Coal, Aluminium, Lithium, a reduction in supply is estimated that will limit Russian exports to other destinations.

In Latin America, as in other regions of the world, the consequences will be felt in the coming months. Brazil and Mexico, which are important producers of agricultural products, will be affected by the supply of fertilizers, for example.

“In the short term, there is a lot of volatility in the prices of commodities and an imbalance between supply and demand,” explains Rina Quijada, VP for Latin America of S&P Global Commodity Insight, formerly IHS Markit.

The specialist believes that governments will have to make decisions to help minimize the impact on availability and prices, particularly in countries where presidential elections or representation in congress and/or senate are in the offing, as is the case in the United States. and elections in November.

“The absolute values ​​of the price of oil or resins at the moment are less important than the availability of the product. Keeping the fundamentals of the market in mind is essential today to assess trends”, says the expert. Today more than ever it is important to be informed, since price volatility and product availability will be unpredictable.

It is known that Latin America is deficient in most basic products and it is important to analyze each country independently, since, for example, the petrochemical supply scenario is very different in Mexico, where only ethane is cracked, in comparison with Brazil, which mainly uses naphtha for the production of basic petrochemicals and their derivatives such as PE/PP/PVC/PS.

The demand throughout the region, from Mexico to Patagonia, continues to grow, so we must consider schemes to know how we are going to achieve competitive production and detect the import sources that the market demands.

“The year 2022 will be a year of great price volatility and unprecedented situations.”

Energy security and sovereignty will be the objective that drives decision-making and the issue of energy transition towards the use of clean energy will be strengthened, as well as Europe’s dependence on a single producer, Russia, especially in the supply of gas. .

The war in Ukraine made the dependency on basic products visible and surely, this event will bring about many commercial changes.

“Approaching new producers in the United States makes a lot of sense, in addition to the fact that it is important that they strengthen the relationship with their current suppliers,” advises Rina Quijada to plastics transformers.

On the other hand, the current situation opens up a great opportunity for the recycling industry, which will be the one that captures an important part of the demand, also driven by sustainability policies.

“Due to persistent volatility throughout the year, timely information becomes very important. Changes happen so fast that what happens in the morning can be totally different at night. Every day has its own desire, and we have to be very vigilant, maintain the fundamentals and check prices day by day, as if it were a radar that we must follow at every moment”.

On March 1, 2022, the merger of IHS Markit with S&P Global is finalized and a new company emerges forming synergy between the two. Dr. Rina Quijada remains as Vice President for Latin America. S&P Global Commodity Insights is a leading independent provider of information, benchmark prices and analysis of the energy and commodity markets.