Securing supply chains of strategic industries has come into focus in light of the pandemic, the war in Europe, and the deteriorating situation in the pacific.
Last year, 2021, was the year of the shortage of everything from construction materials to cooking oil, fertilizers, gas pharmaceuticals, and even silicon chips.
But your hope was misplaced if you thought that things could only get better in 2022.
“2021 was the year of the shortage of everything from construction materials to cooking oil, fertilizers, gas pharmaceuticals, and even silicon chips”
WIN INVESTING
The Russian invasion of Ukraine has made securing supply chains of strategic industries a nightmare
Ukraine provides a quarter of the world’s soft commodities, and is one of four main corridors where 48 natural Ukrainian gas pipelines funnel Russian natural gas to north, central, and southern Europe. Moreover, Ukraine’s Black Sea ports are a logistics hub connecting the world’s shipping lanes to vital grain crop silo terminals. Routing Ukraine’s vast agricultural crop yields would be four times expensive by road or rail.
The Kremlin’s Russian President Putin now controls the right of passage in the Black Sea, which is in the Russian sphere of influence. Put simply, POTUS or the Federal Reserve no longer has a significant impact on food and energy prices instead, it is PORUS.
So, then the Greatest geopolitical event in Europe since WW2, the Russian invasion of Ukraine, is indeed chipping away at US hegemony.
NATO, the alliance of the wobbly knees, was too feeble to impose a no-fly zone in the heart of Europe because it feared confronting Russian fighter jets.
“Ukraine provides a quarter of the world’s soft commodities”
WIN INVESTING
So what is the purpose of NATO?
When will NATO members start questioning whether surrendering 2% of their national GDP for collective security represent value for money?
In the age of mutually assured destruction, MAD collective security amongst great powers and their allies could be obsolete.
Think about it. Will a Great superpower risk annihilation to save an ally? Those proposing joining NATO, should watch Sophie’s Choice, which is an insight into human nature under the most extreme stress imaginable.
“The Russian Ukraine war, and the loss of the Black Sea from the US sphere of influence, could be the geopolitical event sending the US Empire on the back foot” – Win Investing
Putin, the strongarm of the East, is forcing a multi-polar world, which impacts globalism, and securing the supply of strategic industries will be vital
The Russian Ukraine war, and the loss of the Black Sea from the US sphere of influence, could be the geopolitical event sending the US Empire on the back foot.
From history, we know that Empires are naval powers. They control the world’s sea routes, and their hegemonic power stems from influencing international trade and foreign policy, which benefits their interests. When a hegemonic power is in retreat, it begins losing the right of passage of major shipping lanes.
With the US and its allies surrendering the Black Sea, we could be witnessing the beginning of new world order. Globalism has substituted trade with the West versus trade with the East. But China is the conundrum, and where will the world’s factory sit in this new world order? For now, China appears to be strategically saddling both spheres of influence.
The crux of this piece is securing supply chains of strategic industries in this new world order where a unipolar world is no more
In war, everything becomes politicized, weaponized to defeat the other side.
So as the US and its allies aided and abetted the Ukraine sinking Russia’s flagship, the Moskva, Russia, the country with more Chess Grandmasters in the world, is weaponizing food and energy.
One by one, countries could fall to the Russian sphere of influence as the leaders presiding over populations of hungry and energy starved decide to backpedal Russian sanctions.
“The combustion engine remains the most reliable and robust power-unit currently available. The shift towards electrification of mass transportation could free up diesel fuel for agricultural purposes” – Win Investing
If the above, being pally with Russia, is unpalatable, then the alternative is to secure supply chains of strategic industries
So, since food and energy have become weaponized, the US and its allies will need to rely more on the western supply of food crops and energy supplies.
All arable land will need to be farmed, yields maximized, as failing to do so could result in a biblical famine. Global famine could be the new weapon of WW3.
For investors farmland and everything and anything relating to it could be a wise investment.
So tractor and accessory manufacturers, machine parts, crops, and fertilizer manufacturers could all see higher revenues in future.
Securing diesel fuel supply could also become a priority, bearing in mind tractors and agricultural machines powered by combustion engines and fueled on diesel.
The combustion engine remains the most reliable and robust power-unit currently available. The shift towards electrification of mass transportation could free up diesel fuel for agricultural purposes.
Securing the supply chain of strategic industries could also include items less expected, like tires and raw materials used in making tires.
From the Russian invasion of Ukraine, we saw how multi-million dollar weapon systems were out of action due to poor-quality tires. Logistics civilian trucks, military trucks, and tractors all need tires.
Securing supply chains of strategic industries also includes high technology semiconductor manufacturers, which continues to experience shortages in 2022
The onshoring of semiconductor capacity is crucial to national security.
“When you think about national security, you probably don’t immediately think about semiconductors. These tiny chips are the “brains” enabling all the computational capabilities and data storage that we take for granted today. Chips power virtually every sector of the economy – including data centers, automotive, healthcare, banking, and agriculture,” wrote zero hedges. Semiconductors are used extensively in the fourth industrial revolution industries
Global semiconductor revenue is projected to total $676 billion in 2022, an increase of 13.6% from 2021, according to Gartner, Inc.
Moreover, the semiconductor shortage could extend into 2022, which, if so, could support higher chip prices.
So investing in supply chains of strategic industries could be a prudent inflation hedge in the future.
