Russia’s invasion of Ukraine is expected to exacerbate supply chain disruptions that could make investments in everything from real estate to private credit riskier and more expensive.
Supply chain reliability is now a risk as there is a good amount of metals flowing out of Russia, said Gerald Chew, Houston-based managing director and private markets consultant for Meketa Investment Group.
In light of the strong aspirations of businesses and governments to shift to renewable energy, electric vehicles and batteries, it is important to build resilient supply chains that are less impacted by global disruptions, Chew said. Examples of metals from Russia include titanium and rare earth minerals.
There is an opportunity for investment as companies use these metals to develop domestic capabilities in mining, refining and processing of metals, he said.
Supply chain issues involving the export and import of grain are also likely to stem from the war in Ukraine, a major grain exporter, Chew said. But it could create opportunities as well as risks, he added.
“The United States is a big grain exporter,” Chew said. “With some of the supply issues likely to come from Ukraine, the United States could be well positioned for grain exports to the rest of the world.”
Private credit and property managers are keeping an eye on the risks associated with supply chain disruptions.
“Even before the Russian invasion of Ukraine, we were closely monitoring supply chain issues with our borrowers and rising commodity prices,” said Theodore L. Koenig, President and CEO of the Chicago-based private credit manager Monroe Capital LLC in an email.
Monroe has added commodity and commodity pricing to its matrix of key portfolio management elements used to evaluate a possible investment, along with other metrics such as revenue, expenses and gross margin.
“The supply chain was a priority for 2021, and now with the invasion of Ukraine it risks making an already difficult situation worse,” said Mr Koenig, the son of a Holocaust survivor. who has publicly spoken out against Russia’s invasion of Ukraine.
Jon Pharris, Newport Beach, Calif.-based co-founder and chairman of industrial real estate manager CapRock Partners, expects further supply chain issues to arise in the wake of the war in Ukraine.
“It’s incredibly difficult to say what’s going to happen because of the conflict” in Ukraine, Mr. Pharris said. The company has a value-added real estate strategy as well as an industrial development strategy. Even so, the war could “serve as a way to continue to create supply chain problems”, he said.
Supply chain issues would not significantly impact CapRock’s value-added businesses, except for investments involving building renovations like wood, he said.
Russia is the world’s largest lumber exporter and the seventh-largest exporter of forest products, primarily softwood lumber and paper products, according to Wood Resource Quarterly. In 2021, Russia exported forest products worth more than $12 billion.
Supply chain issues would have a very big impact on the development side of its business by making construction time longer and more expensive, Mr. Pharris said.
“The time to order materials for construction has been getting earlier and earlier in order to meet construction schedules,” and further supply chain disruptions would make the time needed longer, he said.