Commodity markets around the world have been rocked by the war in Ukraine.
This has not only been a consequence of the harsh Western sanctions against Russia, which now include oil and gas.
Commodity prices are also soaring due to supply disruptions caused by the Russian invasion, which has blocked the flow of grains and metals from the region.
Russia and Ukraine play a strategic role in world commodity markets.
They are major exporters of basic raw materials, from wheat and grain to oil, natural gas and coal, gold and other precious metals.
And the war has already hit both domestic production and crucial supply chains to the rest of the world, sending prices skyrocketing.
The situation has been described as “catastrophic” for many countries, particularly the poorest.
Experts warn of the consequences of what they call “extreme volatility” in the markets as a result of the invasion of Ukraine.
And there are fears about economic growth in countries that are still recovering from the covid pandemic.
These are 4 key exports that are being impacted by the war in Ukraine.
1. Energy
Russia’s economy is highly dependent on the export of oil and gas.
It is the third largest oil exporter in the world (after the US and Saudi Arabia) and one of the largest gas exporters.
Before the invasion of Ukraine, Russia provided one in every 10 barrels of oil the world consumed.
But now, with the war, and the US, Canada and UK announcing a ban on Russian energy imports, the world oil market is facing its biggest turmoil since the 1970s .
Experts say prices are likely to continue rising for the duration of the war, as there are few alternatives to replace Russia’s exports of roughly 5 million barrels a day.
OPEC has indicated that finding such alternatives will not be easy, as OPEC Secretary General Mohammad Barkindo told reporters.
“There is no capacity in the world” that can replace Russian production, he said, adding that “we have no control over current events, geopolitics, and this is dictating the pace of the market.”
But even countries with low imports of Russian energy will feel the pinch, as the measures are likely to push up already high wholesale prices.
2. Food
Both Russia and Ukraine are major exporters of food products.
The two countries, known as “the breadbasket of Europe,” account for 29% of global wheat exports and 19% of corn exports, according to JP Morgan.
Ukraine is the world’s largest producer of sunflower oil, with Russia ranking second, according to S&P Global Platts. Together they represent 60% of world production.
Wheat prices on some futures exchanges have been trading at 14-year highs.
Both wheat and sunflower oil are key raw materials used in many food products.
And if harvesting or processing is hampered or exports are blocked, importing countries have to find ways to replace supplies.
Analysts warn that the impact of the war on grain production could double global wheat prices.
This could seriously affect several countries that depend on grain imports from the Black Sea region.
Turkey and Egypt receive almost 70% of their wheat imports from Russia and Ukraine. And the latter is also the main supplier of corn to China .
World Food Program director David Beasley told the BBC that rising food prices due to the conflict in Ukraine could have a catastrophic impact on the world’s poorest countries.
“Lebanon, 50% or so, of its grain comes from Ukraine. Yemen, Syria, Tunisia, and I could go on and on, depend on Ukraine as a supplier of grain,” he noted.
“So (Russia and Ukraine) are going to go from being a granary to literally having to deliver bread to them . It’s just an unbelievable reversal of reality,” he added.
3. Metals
Russia is one of the world’s largest suppliers of metals that are used in everything from aluminum cans to copper cables to car components.
It is the fourth largest global exporter of aluminum and is one of the world’s top five producers of steel, nickel, palladium and copper.
Ukraine is also a major producer of industrial metals and has a significant share in the export of palladium and platinum.
This means that due to the invasion in Ukraine, we could see a price increase for canned goods and copper wiring.
“We’ve seen aluminum and nickel rise 30% since the beginning of the year, and that will eventually trickle down to consumers when they buy their beverage cans made from aluminum, or when they do home renovations and need copper for their wiring, all those prices go into general inflationary pressure,” Matthew Chamberlain, director of the London Metal Exchange, told the BBC.
Russia is also the third largest producer of gold , after Australia and China . According to data from the World Gold Council, last year it supplied 350 tons of the precious metal.
Gold reached its highest price since August 2020 in early March, trading at more than $2,000 an ounce.
This due to the influx of capital from investors seeking a safe haven in times of market uncertainty.
But the price of other metals soared on fears of supply disruptions from Russia and Ukraine.
In early March, nickel – used in lithium-iron batteries – soared 76%, and palladium – used in car catalytic converters to reduce emissions – reached record levels, reports Reuters.
Any disruption to palladium supply, analysts say, could pose serious problems for automakers.
“Russia accounts for 38% of global palladium production. As supply outages cannot be made up elsewhere, the market is at risk of falling into a sizeable supply shortfall,” the Commerzbank strategist told Business Insider. , Daniel Briesmann.
4. Neon
Ukraine is one of the main suppliers of purified rare gases such as krypton and neon, the latter essential for making semiconductors.
According to TrendForce data, Ukraine accounts for almost 70% of global exports of purified neon gas, which is used to create the lasers that etch the patterns in semiconductors.
And more than 90% of the neon used by the US chip industry comes from Ukraine.
Any disruption to their supply could worsen the microchip shortage, which was already a major problem in 2021.
“With Russia supplying over 40% of the world’s palladium supply and Ukraine producing 70% of the world’s neon supply, we can expect the global chip shortage to worsen if military conflict persists,” Tim Uy wrote in a recent report. , from Moody’s Analytics.
“During the 2014-2015 war in Ukraine, neon prices increased several times, indicating how serious this may be for the semiconductor industry.”
“Semiconductor companies account for 70% of the total demand for neon, as neon is an integral part of the lithographic process to make chips,” he added.
