Russia’s ongoing war in Ukraine will force Lithuania to find new import markets for metals and timber. The Economy Ministry believes that it is possible to find substitutes, but not without an impact on prices.
Due to war in Ukraine, Lithuanian businesses are facing interruptions in the supply of raw materials, Ričardas Sartatavičius, head of the Lithuanian Confederation of Industrialists, said on Wednesday during a discussion in the Parliamentary Committee on Economic Affairs.
“The biggest problem we face is the supply of raw materials, especially metals, steel. Orders that we have planned for third countries, including Germany and Sweden, may not be fulfilled,” Sartatavičius said.
“This is because most of the raw materials came from Ukraine, which is fighting for its freedom, and some of the raw materials also came from Russia. Some raw materials are desperately needed because the red lights are already on,” he added.
According to Sartatavičius, the transport sector is also facing staff shortages, as Ukrainian drivers go back to their country.
“Ukrainian drivers are leaving to defend their homeland. It cannot be otherwise. Those who can defend it must do so,” he said, adding, however, that more Belarusians who do not want to fight against Ukraine are fleeing to Lithuania.
According to Deputy Transport and Communications Minister Loreta Maskaliovienė, Lithuanian companies are already looking for drivers in countries, such as Moldova and Georgia.
Substitutes
Ieva Valeškaitė, Deputy Economy and Innovation Minister, said that the “situation is difficult in the metals, fertilisers, and timber sectors”.
“Substitutability in these sectors is mixed. We can replace Russian or Belarusian timber with Lithuanian one. Of course, prices will be higher,” she said.
“According to the European Commission, aluminium imports from Russia may be replaced by imports from India, Canada, Australia, and Iceland. Steel and iron products may be substituted by Brazilian, Japanese, and Mexican products,” the deputy minister added.
According to her, negotiations are currently underway within the European Union institutions on the possibility that the EU could jointly buy raw materials. The European Commission is also considering support mechanisms for EU businesses affected by the war in Ukraine, she added.
Threefold impact
Due to war in Ukraine, the Lithuanian economy could be affected through three channels, said Aurelijus Dabušinskas, head of the Economics Department at the Bank of Lithuania.
“The first effect would be the one that comes through foreign trade. The second would be through commodity prices, mostly through energy prices, but also through agricultural products or food prices,” the economist said.
“The third channel would be an increase in uncertainty about the economic future. This has a negative impact both on household consumption trends and on companies’ investment plans,” he added.
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