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War in Ukraine could hit prices of electric motors and drives
The conflict between Russia and Ukraine is likely to push up prices of electric motors and variable-speed drives, according to the analyst, Interact Analysis. Russia is a key supplier of copper and aluminium which together represent around 16% of the cost of manufacturing a motor, while Ukraine produces about half of the world’s supply of neon gas – a key ingredient in the production of semiconductor components, which could affect the prices of equipment containing these components, such as VSDs and other automation equipment.
In a blog post, senior Interact analyst Blake Griffin points out that Russia is responsible for around 6% of the global supply of aluminium and 5% of the global supply of copper. It also accounts for nearly 7% of the world’s supply of the copper wire that is used to produce motor windings.
The price of aluminium rose during 2021 as a result of Covid-related supply disruptions, but was starting to stabilise towards the end of the year, with the World Bank predicting that it would rise by a further 5% during 2022. But, following the breakout of the war in Ukraine, Interact now regards that figure as “conservative”, pointing out that prices hit record highs in February.
Similarly, the analyst expects copper prices to reach record levels in the coming months. Electric motors experienced “significant” price increases as raw material costs climbed during 2021. According to Blake Griffin, “it would appear that price increases are likely to continue into 2022”.
Neon gas, although not directly used in the manufacturing of VSDs, is needed to etch silicon when producing semiconductors. With two Ukrainian companies that are responsible for half the world’s supply of neon having had to shut because of the war, semiconductor production will face an additional challenge.
Although semiconductor producers are said to have stocked up on neon before the conflict, these stockpiles could run out. “Should this occur,” Griffin warns, “semiconductor supply could again fall into disarray and drives suppliers would face sourcing problems similar to those at the start of the semiconductor shortage in early 2021.”
Aluminium, copper, and neon are just three areas where the war will affect the production of motors and drives, he adds. There are other potential impacts including increased freight costs on the back of higher diesel prices, disrupted steel supplies, and the impact on end-markets such as mining and oil & gas which are important to the Russian and Ukrainian economies. “The impacts of this war are far-reaching, and we have only just begun to bear the consequences of Putin’s ill-intended actions,” Griffin concludes.
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