European chemical distributors are seeing business in Ukraine return more than 100 days into Russia’s invasion and are also monitoring supply chains rebalancing in Russia following the imposition of western sanctions, senior executives on Monday.
According to German distributor Brenntag’s CEO, 60% of the company’s business in Ukraine had returned in May following a complete collapse in the first weeks of the conflict.
Christian Kohlpaintner added that there has been a strong pull from the construction sector.
He was speaking on a chemicals distribution CEO roundtable webinar organised by trade group Fecc and ICIS.
Brenntag has stopped all exports to Russia and Belarus, leading to some difficult commercial discussions.
“We are unwinding the business in Russia in a controlled manner,” Kohlpaintner added.
“The situation in Russia is not as bad as people think,” he said, however, with consumers able to purchase top brand mobile phones and other goods.
Supply chains are realigning, panel members noted, with the vacuum left by European and US companies being filled by others.
Peter Wilkes, board member and spokesperson for Germany’s Biesterfeld Group, suggested the that overall impact of sanctions on chemicals distribution in Russia might only be short term.
Alternative channels of supply will be used and material will move in and out of Russia from alternative global players.
“It will find a new equilibrium fairly quickly,” Wilkes said.
Kohlpainter said that industry in Russia was responding as you would expect.
Of greater concern is the longer-term competitiveness of the European chemical industry, Brenntag’s CEO stressed.
The lack of access to cheap energy from Russia will hit the sector over the next four years, he said.
Faced with high energy costs, trade flows will adjust.
“Bringing liquefied natural gas [LNG] from the US to Europe is just a first pre-cursor,” he suggested, before other products begin to flow across the Atlantic. - ICIS-