Analysis Of The Impact Of The Situation in Russia And Ukraine On The Foreign Trade Of My Country's Lighting Industry

Recently, the situation in Russia and Ukraine has suddenly heated up, geopolitical risks have risen sharply, and the US and Europe have continued to impose sanctions on Russia, which has also triggered violent fluctuations in the global market. , soybeans, rapeseed oil, aluminum, nickel and other commodities prices soared. The gradual escalation of regional conflicts and the impact of the continued raging epidemic have magnified the concerns of all sectors of the world. The so-called "under the nest, how can there be no eggs", the foreign trade situation of lighting products has been hampered by the overall situation.

As an important area along the northward route of my country's "Belt and Road" construction, Russia has always been an important market for lighting exports. In 2014, it once jumped to the second place in the export market of lighting products (second only to the United States). China is also basically stable at around 10.

In 2021, the total amount of lighting products exported from my country to Russia will reach 1.2 billion US dollars, a year-on-year increase of 20.7%, but there is still a long way to The huge dilemma encountered at the level of economic development. Among them, the LED lighting products exported to Russia amounted to 1.02 billion US dollars, a year-on-year increase of 17.6%, making Russia the 11th in the world and the 5th in Europe in the market ranking of China's LED lighting products export destinations.

Ukraine is also an important strategic fulcrum of my country’s “Belt and Road” initiative. Although its economic development was relatively sluggish after the disintegration of the Soviet Union, Ukraine, known as the “granary of Europe”, ranks second in terms of land area (600,000 square kilometers) and seventh in population in Europe. (42 million people), it can also be regarded as a regional power, and it ranks around 35 in the ranking of China's lighting product export destination countries. In 2021, the total amount of lighting products exported from my country to Ukraine will be 260 million US dollars, a year-on-year increase of 46.3%; of which LED lighting products will be 220 million US dollars, a year-on-year increase of 44.2%, ranking 35th in the export destination market of LED lighting products and 12th in Europe. bit.

From the perspective of market size, lighting products exported to Russia accounted for about 1.8% of the total export volume, and the export scale of lighting products to Ukraine was even smaller, only 0.4%, accounting for a small proportion of the entire plate. In addition, the lighting industries of the two countries are not developed, and the lighting products imported to China can be ignored. Therefore, from the current point of view, the conflict between Russia and Ukraine has no overall impact on my country's lighting foreign trade, but only has a greater impact on some export enterprises with Russia and Ukraine as their main markets.

2. Short and medium term impacts

(1) Export to Ukraine

1. Logistics is blocked and trade is interrupted

Affected by the war, the tension in international shipping has been exacerbated. Currently, the Black Sea and the Sea of Azov have become high-risk areas. Major Ukrainian ports such as the Port of Odessa have been closed, and a large number of ships have been diverted. The phenomenon that documents cannot be sent or negotiated under the letter of credit transaction has increased sharply; under the non-certificate payment method, the derivative goods are rejected, and the goods are difficult to return or resell after entering the customs, and the risk of customers abandoning the goods increases.

2. Demand has plummeted

As a war zone in Ukraine, people are panicking, the economy is shut down, business is stagnant, and foreign trade orders related to Ukraine are inevitably greatly reduced.

3. Supply wait and see

Under the current abnormal situation in Ukraine, business risks such as customer refusal to accept goods, payment arrears, or even bankruptcy and loss of contact have greatly increased, and major insurance companies have stopped underwriting Ukraine-related business. At present, the prospect of the war is unclear, and export companies must also take a wait-and-see attitude and suspend business development in Ukraine.

(2) Exports to Russia

1. Difficulty in trading

On February 26, Western countries led by the United States and Europe announced that some Russian banks such as SBER and VTB were prohibited from using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international settlement system. The phased cut off made it more difficult for Russian customers to pay, which in turn pushed up the cost of foreign trade transactions with Russia, and their trade activities were greatly suppressed. Therefore, the relevant export enterprises face the liquidity risk caused by the current inability of Russian customers to pay.

2. The exchange rate plummeted

As the situation escalated, the Russian ruble depreciated sharply. The exchange rate of the Russian ruble against the U.S. dollar fell to a record 1:100; at the same time, the renminbi appreciated as a safe haven, approaching the 6.3 mark against the U.S. dollar. For related export companies, the Russian exchange rate plummeted and the import cost of customers soared, which suppressed demand; and the appreciation of the RMB further reduced the already thin export profits.

3. Inflationary pressure

The sudden war led to the spread of panic and risk aversion, the pressure of capital outflow and exchange rate depreciation increased sharply, triggering a series of financial market fluctuations. In order to combat inflation, the Central Bank of Russia announced an interest rate hike on February 28, significantly raising the benchmark interest rate to 20%. The significantly increased inflation risk will directly affect the willingness and solvency of Russian customers to pay.

4. Demand shrinks

It can be seen that this round of Western sanctions against Russia is much stronger than that of the Crimea incident in 2014. These sanctions involve political isolation, asset freezes, export controls, financing restrictions, the ban on the settlement of the US dollar and other international currencies, etc., which will greatly affect the recovery process of the Russian market, and the one-time sharp interest rate hike by the Russian Central Bank to fight inflation will also be a drag. The already fragile Russian economy. Based on the experience of the cliff-like decline of lighting exports to Russia after 2014, the export to Russia in 2022 is not optimistic.

5. Supply shocks

The conflict between Russia and Ukraine will further push up the cost of some raw materials and international logistics costs that have been operating at a high level under the influence of the epidemic, and the impact on the global supply chain cannot be ignored. In particular, it will have a significant impact on the business of the majority of downstream processing lighting export enterprises.

In response to the above-mentioned short- and medium-term impacts, relevant export companies should pay close attention to the development of the situation, comprehensively sort out the orders and project execution progress in the Russian-Ukrainian market, and do a good job in risk prevention; make appropriate advance arrangements for the procurement of some raw materials whose prices may fluctuate greatly; To the extent possible, cross-border RMB settlement should be adopted for Russian business;

3. Future Impact

In addition to the direct wear and tear of the war, the Russian-Ukrainian conflict will also bring risks to the world of skyrocketing raw material logistics costs, rising inflationary pressures, tightening monetary policy, and sharp fluctuations in exchange rates. Now that the world is in the post-epidemic era, the foundation for economic recovery is weak. In response to the risk of high inflation, major Western economies have turned to tightening monetary policies. More and more economies have joined the ranks of raising interest rates. The market is also worried that the uncontrolled situation in Russia and Ukraine will drag down the world. Economic recovery.

In the future, the medium and long-term impact of the situation in Russia and Ukraine on the international lighting market will be mainly reflected in three aspects. First, the escalation of the situation may lead to the implementation of more aggressive tightening policies in various economies, and the recovery of the world economy will further slow down, dragging down global commodity demand; Second, the continuation of the conflict will continue to push up the prices of bulk commodities and logistics, further hitting the repair of the global supply chain, that is, a long-term supply shock; third, the future direction of the situation in Russia and Ukraine is still unclear, and the continued impact of the epidemic will continue to increase uncertainty. The enemy of planning and decision-making, the expected weakening will be inevitable.

To sum up, the situation in Russia and Ukraine may have a certain impact on China's lighting external demand market, but on the one hand, the proportion of the two countries' overall market is not high, and the direct impact is relatively limited; on the other hand, the background of high global inflation and limited supply capacity The rigid demand of various countries for daily consumer goods such as lighting products is still strong. China's position as the manufacturing center and supply chain hub of the global lighting industry has been further consolidated during the epidemic. It is believed that China's lighting foreign trade will remain in 2022. Consistent tenacity.