Raw Material Supply Crisis 'Worsens'... Complete Car Factories Halt and Auto Parts Suppliers Face Chain Impact (Comprehensive)

Global Industrial Crisis from Ukraine
Neon Gas 70%·Krypton 40% of Worldwide Rare Gas Supply
Production Halt Deepens 'Supply Bottleneck'...Trade with Russia Virtually Blocked
Chain Impact on Parts Industry Inevitable, Prolonged Crisis May Disrupt Electronics and Phone Production

On the 3rd (local time), black smoke is rising from an oil depot in Chernihiv, northern Ukraine, following a bombing by Russian forces. On the 8th day of the invasion, despite Ukraine's strong resistance, Russian troops are advancing toward the capital Kyiv (Kiev) and are concentrating their attacks on the second-largest city, Kharkiv (Kharkov).

[Asia Economy reporters Choi Dae-yeol and Lee Hyun-woo] The refining plants in Ukraine, a major supplier of rare gases such as neon and krypton essential for semiconductor production, have completely halted production due to Russia's invasion. The global automotive industry, already struggling with semiconductor supply issues, is now on high alert.

In particular, domestic auto parts manufacturers, whose export routes to Russia have been blocked due to the international community's stringent sanctions, are in an emergency state. Some companies have reportedly faced difficulties in paying salaries and parts payments as all shipments of export parts were canceled. There are concerns that if the war prolongs, it could affect not only the automotive industry but also electronics and smartphone manufacturers.

Ukraine Refining Plants Halt Operations... Raw Material Supply Shortage Deepens

According to CNN on the 3rd (local time), Tim Uy, an economist at Moody's Analytics, said, "The global semiconductor supply shortage is likely to worsen due to the Russia-Ukraine crisis," adding, "If a ceasefire agreement is not reached within a few months and the war prolongs, it will pose a significant risk to automotive, electronics, and smartphone manufacturers."

This is because the refining plants in Ukraine, a major rare gas producer supplying 70% of the world's neon gas and 40% of krypton, have completely stopped production, raising supply concerns. In particular, the southern city of Odesa, where Ukraine's largest rare gas refiner Cryoin's headquarters and main plants are concentrated, has halted production at all factories since the 24th of last month due to Russian offensives. Amid supply chain disruptions caused by the war, the supply contraction is expected to worsen.

Vehicles near a building hit by shelling in Kharkiv, Ukraine are damaged.

Due to COVID-19, vehicle semiconductor production and other key parts manufacturing have faced disruptions over the past two years, and complete vehicle production remains unstable. Recently, the supply chain bottleneck that had somewhat improved is likely to worsen again. A representative from the complete vehicle industry said, "The semiconductor supply shortage had somewhat eased compared to the second half of last year," adding, "We need to observe further to see how it will be affected going forward."

Japan's Nihon Keizai Shimbun, citing Morgan Stanley's estimates, predicted, "Taiwan's major semiconductor companies have about six months' worth of neon gas inventory, but if the war prolongs, shortages will intensify." It also expressed concern, stating, "Palladium, used as a catalyst in automobile exhaust systems, accounts for 43% of the global market from Russia and Ukraine, mostly exported through Odesa, raising supply concerns."

Direct Hit to Auto Parts Suppliers... "Concerns Over Chain Bankruptcies"

Major automakers, facing difficulties procuring parts from Ukraine, are adjusting factory operation schedules, and with trade to Russia effectively blocked due to international sanctions and local logistics issues, a chain reaction of impacts across the automotive and parts industries is inevitable. According to the industry, major automakers worldwide have halted factory operations or reduced production plans due to this situation. Hyundai Motor reportedly cut its production plan at its Russian plant to about half this month. The company has decided to halt factory operations until the 5th due to parts supply disruptions. Toyota also plans to stop its Russian plant from mid-month.

Audi, Volkswagen, and Mercedes-Benz have stopped or reduced production of some models at other European plants due to delayed parts supply from Ukraine. Many companies, including Porsche, Nissan, and Honda, have suspended vehicle exports to Russia or withdrawn from local operations. This is due to difficulties in trade transactions caused by financial sanctions and expectations of a downturn in the local economy. Professor Kim Pil-soo of Daelim University said, "About 40% of exports to Russia are automobiles and parts, so the impact is significant," adding, "Especially parts suppliers face bankruptcy risks if payment is delayed for 2 to 3 months, so the government should step in to support them."

Volkswagen Dresden Plant's Complete Vehicle Assembly Line

Small and medium-sized suppliers exporting parts locally are experiencing difficulties with order cancellations and payment suspensions. About 15 parts suppliers, including Hyundai Motor Group affiliates such as Hyundai Mobis and Hyundai Wia, as well as Sejong Industry, NVH Korea, Kyungshin, Daewon Industry, Dong-A Hwasung, and Yura Corporation, have established operations in Russia.

Most of these companies entered the local market alongside Hyundai Motor when it built a plant in Saint Petersburg in 2011, supplying body and electrical parts near the factory. A domestic official from a parts company operating in Russia lamented, "There are no direct flights from Korea to Russia for parts exports, so transshipment through places like Hamburg, Germany, is necessary, but transshipment has already been blocked, making exports difficult."

This content was produced with the assistance of AI translation services.