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Eastern Europe

The ongoing conflict in Ukraine has continued to affect business in the region and particularly within the countries involved. Several players have commented that reporting on market conditions is not a priority given the situation.

The partial mobilization announced by Russia on September 21 has led not only to widespread attempts to flee the country but also to plunging stocks for many Russian companies. The ruble exchange rate against the US dollar went from 60 to 54-57, which was not a reflection of a stronger local currency but rather of non-existent imports and therefore no demand for dollars. Many businesses are in watching mode to see whether the partial mobilization will be followed by a full one, which will mean a massive reduction in the available workforce and the re-formating of the country’s production for military needs.

Production has picked up in Ukraine. Two of the four wire rod producers have restarted operations although domestic cable demand is almost non-existent as construction is frozen. Brass semi-finished production and exports remain at approximately 35-40% of pre-conflict volumes, trucked to the ports of Gdansk in Poland and Constanta in Romania. Several smaller aluminium ingot producers from the east of the country have moved to the outskirts of Kyiv. The dual currency (UAH 36.5 and 41 to the US dollar) remains in place.

With winter approaching, the complicated geopolitical situation and recent breaches in the Nord Stream energy supply to Europe are wreaking havoc in every area possible. Many production facilities have been forced either to reduce volumes or stop operations owing to energy costs.

Governments have announced support programmes for industries; some are short term in nature to address the problems of here and now whereas others, like in Poland, are two-year plans. The programmes are either support packages for industries facing potential closure because of increased energy costs or cover for the difference in costs compared to March 2022. Multiple measures to reduce energy consumption have been announced, such as: reducing urban lighting; requesting government staff to work from home and encouraging private companies to do the same; and reducing households’ hot water temperatures.