What are the important effects of the situation in Russia and Ukraine on foreign trade?

1. China Europe train

First of all, it needs to be clear that the China Europe train is not a line, it is a network, and there are many lines to enter Europe.

Until January 2020, only one of the 65 routes opened at that time entered Europe through Ukraine. On September 28, 2021, the first "Ukraine China" train started, making a new breakthrough in China Ukraine transportation cooperation.

In addition, according to the official website of the Ukrainian Railway Administration, as early as last year, Ukraine imposed restrictions on freight trains from China to Poland via Ukraine, but the move did not only affect China. From November 30, 2021, Ukraine banned all trucks and empty containers from transit from Ukraine to Poland, Azerbaijan, Armenia, Belarus, Kazakhstan, Tajikistan, Uzbekistan, Moldova and other countries.

2. Exchange rate risk

As geopolitical risks continued to rise, the currencies of Russia and Ukraine depreciated significantly. According to market data, as of February 23, the exchange rate of the ruble against the US dollar fell by about 5.8% and HRYVNIA against the US dollar fell by more than 4.4%.

On February 24, the exchange rate of the Russian Ruble plunged sharply, and the exchange rate of the Russian Ruble against the US dollar once fell to 1:86, the lowest record since January 2016. The ruble fell to 1:99.99 against the euro, the lowest record since December 2014.

On the same day, the global market was in turmoil, and the Russian stock market was once blown.

At the same time, the RMB is approaching the 6.3 mark.

On February 23, the offshore RMB exchange rate against the US dollar continued to rise close to 6.30, rising by nearly 150 points during the day, reaching a new high of 6.3036 since April 2018. The onshore RMB exchange rate against the US dollar closed at 6.3178 as of 16:30, up 178 points from the previous day.

On February 24, the central parity rate of RMB against the US dollar was raised by 33 basis points to 6.3280. In the morning of that day, the onshore RMB exchange rate against the US dollar reached an intraday high of 6.3105; The offshore RMB exchange rate hit 6.3052 against the US dollar, both reaching a new high since April 25, 2018.

This is because the RMB has a certain hedging attribute. Considering the recent geopolitical conflicts and the tightening of overseas economies, the demand for hedging funds to allocate RMB assets has increased.

But for our foreign traders, the exchange rate of the customer's country plummeted, and the cost of the customer's import soared; The appreciation of China's RMB will reduce our export profits!

3. Sanctions risk

On February 22, US President Biden announced the latest sanctions against Russia and decided to implement comprehensive blockade and sanctions against Russia's two major financial institutions. The sanctions made it impossible for Russia to conduct lending transactions in the US and European markets and raise funds. In addition to the United States, the European Union, Britain, Germany, Canada, Japan and Australia have also successively announced their decision to impose sanctions on Russia.

For the United States and Europe, expelling Russia from the global Interbank Financial Communication Association (Swift) system is one of the most severe financial measures they can take, which will damage the Russian economy immediately and in the long run. This can exclude Russia from most international financial transactions.

4. Soaring raw materials

Russia accounts for about 6% of the world's aluminum production and about 7% of the world's nickel production. The tense situation has increased the supply risk of the market, and the prices of aluminum and nickel have risen sharply.

On February 23, the price of nickel futures on the London Metal Exchange (LME) rose to ￥25000/ MT, breaking a ten-year high, the highest since 2011. Aluminum prices rose to their highest level in more than 13 years. On February 24, LME aluminum price broke through the 2008 high of US $3388, a record high, and the increase expanded to nearly 3%.

In addition, Ukraine and Russia are the global trade centers of wheat, corn and sunflower oil, and Ukraine's corn export share exceeds 10%. According to CCTV finance and economics, in 2021, China imported 8.24 million tons of corn from Ukraine, accounting for 29.07%. The price of corn has risen from 1900 yuan per ton at the end of last year to ￥2600/MT at present. In the long run, Ukraine and Russia are important producers of wheat and corn. If the war continues to break out, the prices of corn starch and products with corn as raw materials will continue to rise.