War in Ukraine is disrupting world supply chains in unexpected ways. Take your dream bathroom tiles

Anyone planning to remodel a bathroom or kitchen ought to speak to Dmitry Kostornichenko, who is an expert on an item we rarely think about: clay. Ask him about the clay his company mines in eastern Ukraine, and he can wax on at length.

“For the ceramics industry, Ukrainian clay is very important,” says Kostornichenko, sales and logistics chief of VESCO. His company is one of the biggest clay producers globally, and the number-one supplier to the European manufacturers that produce much of the world’s high-end tiles.

Kostornichenko, 45, says that for the past decade VESCO has searched the world for alternative clay in a more peaceful location, but found none to match Ukraine’s. “Ukrainian clay is unique,” he explains, speaking to Fortune from Modena, Italy, from where he has worked since Russia invaded Ukraine on Feb. 24. “It has no organic impurities. It is very low iron content, and very good consistency.”

With no alternative, the company concentrated its production in Druzhkivka, in eastern Ukraine, mining 4 million tons of clay last year, and exporting more than $200 million worth to 18 countries in Europe, Asia, and the Middle East. From there, quantities end up as tiles in the U.S.

But that low-iron, pure clay now sits beneath a raging combat zone, as Russia’s military conducts an all-out assault on eastern Ukraine—making it inaccessible to VESCO, perhaps for some time to come.

Shortages by August

For those whose kitchen or bathroom designs call for high-quality tiles, especially if they are bright white or in large sizes, that could mean a change of plans.

“You will feel shortages in the assortment by August or September,” Kostornichenko says. “High-quality tiles are where you will see the first shortages.”

Customers will still find tiles, but they will likely be lower quality, he says, and in more limited, darker colors—reflecting the absence of pure Ukrainian clay.

Italy’s Ceramics Association, whose members source one-quarter of their clay from Ukraine, says there are already shortages. “There is no kaolin, which is used to produce very white and large format tiles,” it said on its website this week. “Alternative suppliers are sought, but the quality is less valuable.”

Compared with the horrific suffering in eight weeks of war, the devastating death toll, the destruction of property, more than 5 million refugees, and the ravaging of Ukraine’s wheat crop, a supply disruption of tiles seems absurdly trivial.

And yet, Ukraine’s clay offers a glimpse into how the war has drastically upended almost every business, in a country of 44 million, as well as the lives of people working in them; the World Bank predicts Ukraine’s GDP will plummet 45% this year.

In the run-up to the war, Kostornichenko rushed to move 1 million tons of clay out of Ukraine; from the time war erupted, the Russian military blocked Ukraine’s ports, so he shipped the stock out to Poland by train—a cumbersome journey—before warehousing it in Italy and Spain. Two months on, the warehouses are running low. “The stocks will be empty in the next month or two,” he says.

More urgent still was evacuating the staff.

“Always facing risks”

VESCO’s parent company, Kyiv-based asset-management company UMG Investments, mobilized a fleet of company buses to shuttle about 3,000 employees and family members out of the war zone, not only from its clay mines, but also its limestone quarry, the biggest in Ukraine, which produces 4 million tons a year for Ukraine’s steel industry.

Situated in Novotroitske, close to the Russian border, the quarry is now in the middle of a brutal conflict. “Some people managed to leave in the first days of the war,” Mykola Shevchenko, UMG’s strategy director, told Fortune from Kyiv. “There were several bombardments of our quarry just before the war. Our people were always facing risks.”

The limestone and clay production will have to wait for peace. But Kostornichenko says he remains hopeful they will eventually return.

“We believe in our army,” he says. “We believe we will manage to reopen the mine at some time. If we’re speaking months, or years, I do not know.”

Never miss a story: Follow your favorite topics and authors to get a personalized email with the journalism that matters most to you.

Read More

Ukraine InvasionCybersecurityEnergyTravel IndustryAutos