Russia and Ukraine hold keys to strategic commodities
Russia and Ukraine, locked in conflict, are vital producers of commodities for industrial and food use — from aluminium, nickel and titanium, to wheat and sunflower oil, to gas and crude.
Since Russia invaded neighbour Ukraine, prices of many of these raw materials have soared to record and multi-year peaks, as Moscow also faces the threat of more Western sanctions.
“The prospect of fresh sanctions on Russia, and moves to ban the purchase of commodities supplied by that country, is driving up prices of oil, gas, wheat, nickel, copper and others, in some cases to new all-time highs, not least because the supply of many of these precious raw materials was already tight,” AJ Bell investment director Russ Mould told AFP.
“Russia is a top-five producer of palladium, diamonds, gas, oil, platinum, potash, aluminium, gold, nickel and steel — so any company or consumer reliant on those will be looking on nervously, while Ukraine and Russia between them account for about a third of the world’s wheat.”
– Energy –
Russia is one of the world’s biggest suppliers of natural gas and crude — and investors are now fretting about potential supply disruptions.
For the time being, Western governments have not included Russian oil in their wide-ranging sanctions on Moscow owing to concerns about the impact on prices and consumers, but the United States and allies are in talks about banning crude imports from Russia.
The prospect sent benchmark Brent oil prices surging to a near 14-year high of $139.13 per barrel on Monday, not far from its 2008 record pinnacle of $147.50.
Europe gas reference Dutch TTF rocketed to an all-time peak at 345 euros per megawatt-hour, with traders fearful as the European Union imports 40 percent of its gas from Russia.
– Agriculture –
Russia and Ukraine are both frequently nicknamed the world’s breadbasket because of their vast exports of wheat.
Wheat struck a record high 450 euros per tonne on Monday, in a market already plagued by tight supplies prior to Russia’s assault on Ukraine.
Russia is the world’s top exporter of cereal and Ukraine is the fourth, according to US official estimates.
Ukraine, which is also a key supplier of corn and sunflower oil, normally transports its soft commodities by sea.
– Metals –
Industrial metals aluminium, nickel and palladium would also be exposed to sanctions, analysts warn.
In a record-breaking performance on Monday, aluminium spiked to $4,073.50 per tonne and palladium hit $3,442.47 an ounce while nickel soared past its 2008 peak of $48,000 per tonne to hit $54,880 — a rise of 90 percent.
Nickel is used to making stainless steel and batteries for electric vehicles.
Titanium, prized by aircraft and automotive manufacturers for its lightweight, high-strength and heat resistant characteristics, also faces turmoil.
Russia’s VSMPO-Avisma is the biggest global producer of metal to the world’s aerospace industry.
US planemaking giant Boeing, which has a long relationship with VSMPO-Avisma, said in a statement that it has suspended purchases from Russia but stressed the group has “substantial” stocks and diverse supply.