5 Commodities to be Affected by Donbass Conflict

Recent tensions between Russia and Ukraine could affect the supply of raw materials globally and this crisis could worsen if the conflict escalates into further violence.

For veteran finance writer, investor, engineer and researcher Alex Kimani, a possible war, as well as the prospect of sanctions against Russia, are fueling fears of supply crises in commodity markets.

Here are the five commodities that could be affected:

• Aluminum: Russia accounts for ~6% of global aluminum supply, and an escalation of tensions between Russia and Ukraine raises the likelihood of a supply shock in an already tight aluminum market. Aluminum prices have risen about 15% year to date, with prices near multiyear highs, but could still rise further.

• Oil: Russia is an oil and gas powerhouse, with the country pumping about 9 million barrels of crude oil a day. Benchmark international crude oil prices are up about 20% year-to-date to trade near seven-year highs, with the oil markets facing supply headwinds, Kimani notes. Others warn that the price of crude oil could rise and the world economy will be “radically altered” if the conflict reaches a higher level.

• Natural Gas: Russia is a leading producer of natural gas, pumping about 639 billion cubic meters of natural gas in 2021, or nearly 17% of global production. European natural gas prices have hit new highs after a pipeline that brings Russian gas to Germany switched flows to the east. In the event that Russia’s gas supplies to Europe dry up, U.S. gas producers are likely to step in to supply Europe with liquefied natural gas, which would imply a large increase in demand and potentially cause a quick reduction of domestic inventories of natural gas.

• Copper: Russia produced about 3.5% of the world total in 2021, according to USGS data, the equivalent of 920 thousand tons of refined copper in 2021. Green metal prices, including copper, are forecast to hit record highs during an unprecedented sustained period in a net-zero emissions scenario. Copper prices are close to record highs on the back of rising demand, especially in developed countries, with increasing use in electric vehicles and wind farms, solar panels and the power grid, combined with tight supply .

• Cobalt: Nornickel is Russia’s largest cobalt producer, selling most of its output to Europe. This country is the world’s leading producer of refined nickel, with a production of 193 thousand tons in 2021, that is, about 7% of world mining production. Cobalt is in high demand by electric vehicle makers like Tesla Inc. and manufacturers in China that are popularizing lithium iron phosphate (LFP) batteries.

Featured image: Construction of the Russian Nord Stream 2 gas pipeline. Photo: Axel Schmidt.

(Misión Verdad)

Translation: Orinoco Tribune

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