- BBC News World
The war in Ukraine rocked commodity markets around the world, and it’s not just a result of Western sanctions against Russia, which now include gas and oil.
Commodity prices also rose due to supply disruptions caused by the Russian invasion, which prevented the flow of grain and minerals from the region.
Both Russia and Ukraine play a strategic role in international commodity markets. Both are major exporters of commodities such as wheat, grains, oil, natural gas, coal, gold and other precious metals.
The war affected both local production and important distribution chains for the rest of the world, driving up prices. Many countries have described the situation as “catastrophic”, particularly the poorest.
Experts warn of the consequences of what they call “extreme volatility” in markets in the wake of Russia’s invasion of Ukraine. There are also concerns about the impact on economic activity in countries still recovering from the COVID-19 pandemic.
The following are the main export products from Ukraine and Russia, the distribution of which was affected by the war.
The Russian economy is largely dependent on the export of oil and gas. The country is the third largest oil exporter in the world (after the European Union and Saudi Arabia) and one of the main exporters of gas.
Before the invasion of Ukraine, Russia supplied one barrel of oil out of 10 consumers in the world. But today, with the war and the announcement of the United States, Canada and the United Kingdom banning the import of Russian energy products, the international oil market is facing the biggest turmoil since the 1970 years.
Experts say prices are likely to continue rising as long as the war continues, as there are few alternatives to replace Russian exports of around 5 million barrels per day.
The Organization of the Petroleum Exporting Countries (OPEC), of which Russia is not a member, indicated that it would not be easy to find such alternatives, said the organization’s Secretary-General, Muhammad Barkindo.
“There is no capacity in the world” that can replace Russian production, Barkindo says. “We have no control over current events, geopolitics, and it dictates the pace of the market,” he adds.
Even countries that import few Russian energy products will feel the impact, as prices for fuel sales to wholesalers are likely to rise.
Both Russia and Ukraine are major food exporters. The two countries, known as the “breadbasket of Europe,” make up 29% of global wheat exports and 19% of corn exports, according to JPMorgan data. Wheat prices in some futures markets have reached 14-year highs.
Ukraine is the world’s largest producer of sunflower oil, and Russia ranks second, according to S&P Global Platts. Together, they account for 60% of global production.
Wheat and sunflower oil are important raw materials used in many food products. If the harvest or processing is damaged, or exports stop, importing countries must find ways to replace this supply.
Analysts warn that the impact of the war on grain production could double global wheat prices. This could seriously affect many countries that depend on grain imports from the Black Sea region.
Turkey and Egypt receive nearly 70% of their wheat imports from Russia and Ukraine, which are also China’s main corn suppliers.
The director of the World Food Program, David Beasley, told the BBC that rising prices due to the conflict in Ukraine could have a disastrous effect on poor countries.
“In Lebanon, about 50% of their grain comes from Ukraine. Yemen, Syria, Tunisia and others depend on Ukraine as a supplier of grain,” he said. “Russia and Ukraine will go from being a breadbasket to literally having to share bread. It’s just an amazing reflection of reality.”
Learn more about the Ukraine crisis
Russia is one of the world’s leading suppliers of metals used in everything from aluminum cans to copper cables and automotive components.
The country is the world’s fourth largest exporter of aluminum and one of the five largest producers of steel, nickel, palladium, and copper in the world. Ukraine is also a major supplier and has a large share of palladium and platinum exports.
This means that due to the Russian invasion of Ukraine, we may see an increase in the price of copper cans and cables.
“We have seen that aluminum and nickel are up 30% since the beginning of the year, and that will eventually be passed on to consumers when they buy aluminum beverage cans or when they make renovations to their homes and they will need copper for the cables. All of these prices go into general inflationary pressures.” , Matthew Chamberlain, director of the London Metal Exchange in London (UK), told the BBC.
Russia remains the world’s third largest producer of gold, after Australia and China. According to the data of the World Council, in 2021, the country supplied the world with 350 tons of the precious metal.
In early March, gold reached its highest price since August 2020, trading over $2000 an ounce (one ounce equals roughly 28 grams).
This is due to capital inflows from investors looking for a safe haven in times of market uncertainty. But prices for other metals rose on fears of supply disruptions from Russia and Ukraine.
In early March, nickel – used in lithium and iron batteries – rose 76% and palladium – used in catalytic converters in cars to reduce emissions – reached unprecedented levels, according to Reuters news agency.
Analysts say any disruption to palladium supplies could create serious problems for automakers.
“Russia accounts for 38% of global palladium production. Since other regions cannot compensate for supply cuts, the market risks falling into a huge supply shortfall,” Commerzbank strategist Daniel Pressman told Business Insider.
Ukraine is a major supplier of purified noble gases such as krypton and neon, the latter of which is essential for semiconductor manufacturing.
According to data from consulting firm TrendForce, Ukraine accounts for nearly 70% of global exports of purified neon gas, used in lasers that etch patterns in semiconductors.
More than 90% of the neon used in the US chip industry comes from Ukraine. Any change in its supply could exacerbate the shortage of microchips, which was already a big problem in 2021.
“With Russia providing more than 40% of the world’s palladium supply and Ukraine producing 70% of the world’s neon supply, we can expect the global shortage of chips to worsen if the conflict continues,” Tim Uy wrote in a recent report for Moody’s Analytics.
“During the 2014-2015 war in Ukraine, neon prices rose several times, which indicates the seriousness of the semiconductor industry. Semiconductor companies account for 70% of the total demand for neon, because neon is an integral part of the lithography process for making chips.”
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