Column number 84 – 2022
What to say? There was really a need for it. After the pandemic, or perhaps it is even better to say “during a pandemic”, the war. From a strictly industrial point of view, the transition to the contemporary age has caused an inversion of the role of war in development: if, up to the Second World War, wars had, as a side effect, a decisive technological progress, just think of the development of the jet or rocket engine, from the Korean War onwards the war has always been a chasm into which human lives, entire existences and also incalculable quantities of raw materials, resources and economic potential have been thrown.
The war in Ukraine fits perfectly into this vein of senseless destruction: if, according to an old definition, war is the nation-state version of aggression for the purpose of robbery, in this case, whatever the final spoils, there are strong doubts that the game is worth the candle, given the amount of lives and resources inexorably thrown into the cauldron of conflict. According to estimates by the National Institute of Economic and Social Research, the war in Ukraine will cost the world one point of GDP, about $ 1 trillion. Sanctions on Russia alone will cost 22 billion of euros to Italy due to the decline in exports, especially as regards luxury items, machine tools and technological products, not to mention the difficulties due to increases in raw materials and energy. There are over 300 Italian companies that have commercial relations with Russia, the 14th trading partner in the world.
As for the European Community, the value of exported goods is 79 billion euros, while imports amount to 95.3 billion. Despite the sanctions following the war in Donbass and the annexation of Crimea in 2014, which caused a reduction in Russian exports by more than 50 billion euros per year between 2010 and 2020, the European Union remains the first trading partner of Russia. In short, if for the whole of the nineteenth and part of the twentieth century for a large part of the industry, war could be a resource for development, increase in turnover and technology, in the twenty-first century it became a bad investment, except for the companies of the defense, and even for them up to a certain point. In fact, the costs of a war are too high for one to think that it will last long enough to make it an excellent deal: in the short term, peace is much more profitable. Now that the worst of the pandemic seemed to be over, a conflict restricted from a military point of view but on a global scale as regards the economic consequences risks stifling in the bud the recovery which, thanks to the measures of NextGenerationEU, was taking on decidedly marked characters, with a GDP growing between 4 and 7% in the Euro area. Just over a month of conflict has caused estimates to drop to around 2%, also following the disproportionate increases in energy costs.
Squeezed between the decline in exports and the increase in costs, manufacturing is struggling in search of solutions that are not yet seen on the horizon: if, on the one hand, the cost of gas had already increased for the industry in January of 423% compared to 2018, on the other hand 2021 had marked a record figure, both at European and Italian level, with a very rapid recovery compared to the black crisis of 2020.
And now? Now we hold on: the contracts signed in 2021, fulfilled in the first and second quarter of 2022, will not necessarily be able to take into account the increase in production costs for machine tools. And also for the future, the adjustment of prices to the new costs, both of the raw material, steel, produced by energy-intensive companies such as steel mills, and of the energy used for production, does not appear to be a viable path, even for large competition on the market that leverages the final price. We hold on and hopefully for the best: the rows of the Tube in Dusseldorf, we are sure, will all be rumored: whoever finds the solution to this equation with too many variables will have secured a place in the market of the future.