EMERGING RISK 2
Geopolitical tensions pose risks to supply chains, impacting global trade flows, supply chain resilience, and operational costs. Proactive monitoring and agile strategies are essential for the effective navigation of these uncertainties.
Description
- The Red Sea crisis, fuelled by regional tensions and ongoing conflicts, poses a serious threat to the global trade due to its strategic position connecting Europe, Asia, and Africa, with its impact anticipated to escalate in FY 2024-25
- Heightened tensions between China and Taiwan and China’s military actions in the region have raised concerns about the potential of a full-scale war
- The persistent Russia-Ukraine conflict, coupled with a slowdown in Europe, signifies a rise in geo-economic tensions and continues to impact the region and beyond
- The El Niño event in Panama triggered water shortages and transit restrictions through the Panama Canal, prompting its authority to reduce daily traffic by nearly 40%; this forced ships to take longer ocean routes, increasing both costs and carbon emissions
Possible Impact
- The potential disruptions in trade routes, can increase the cost of importing and exporting raw materials and finished products, affecting Hindustan Zinc’s bottom line
- Delays in the Red Sea or Panama Canal shipments pose the challenge of delays in receiving essential raw materials or components from our BPs located in the affected regions. Such disruptions in trade routes or import-export restrictions could affect Hindustan Zinc’s ability to source raw materials, maintain production schedules and export finished products
- Instability in global trade could lead to fluctuations in commodity prices, affecting our profitability
- Heightened geopolitical tensions may lead to fluctuations in metal prices, affecting our revenue and profit margins
Mitigating Actions
- Strategy to focus on the Indian market and increase the domestic market share
- Focus on more resilient and insulated export markets, such as Southeast Asia and the Middle East
