The Russian-Ukrainian conflict has recently become a global focus. Tensions once led to a global capital market across the board, while energy commodity prices rose further, and the purchase of traditional safe-haven assets such as US bonds and precious metals surged under the rising risk aversion. Looking ahead, how much impact does the Russian-Ukrainian conflict have on commodities? Caixin Futures R&D Service Center released a special research report for this purpose this week.
Crude oil: Russia is currently one of the countries with the highest crude oil production in the world, with oil production of about 10.5 million barrels / day in 2021, second only to Saudi Arabia and the United States, accounting for 11% of global production, most of the crude oil it produces for export, is one of the most important crude oil exporters in the world, mainly supplied to Europe and China, so its production changes have a decisive impact on the global crude oil market.
In the future, if the Russian-Ukrainian conflict continues to escalate, whether it is the interruption of Russian supply, or economic and trade sanctions, it will undoubtedly have a significant impact on the supply and demand of crude oil, oil prices exceed $100 / barrel is only a matter of time; if the conflict is maintained normalization (high probability), the United States and Russia may carry out a longer period of daily game, in the current situation of global low inventories, geopolitical premiums on oil prices support still exist, crude oil prices or follow the outbreak of stage events and show a pattern of high volatility If the Russian-Ukrainian conflict is eased in the short term (unlikely) and finally resolved, the downward pressure on crude oil prices will increase in the case of a political premium on the current increase.
It should be noted that the current Iranian nuclear negotiations are also an important factor in increasing the uncertainty of oil prices, and if the Iranian nuclear talks go smoothly, oil prices are bound to cool down.
Precious Metals: Geopolitical tensions have sparked market concerns, gold has become a safe haven for funds, and international gold prices have risen to nearly two-month highs.
As of 18:00 on February 14, the main gold futures contract on the New York COMEX Exchange closed at $1873.1/oz, up 5.4% from $1777.4/oz on December 15, 2021. Meanwhile, the NYMEX Exchange Palladium Main Futures Contract closed at $2364.5/oz on February 14, 2022, up a staggering 48.4% from a low of $1593/oz two months ago.
The main reason is that Russia is one of the world's largest producers of palladium, which owns 40% of the world's metal palladium reserves, and the market is worried that the escalation of tensions between Russia and Ukraine could trigger severe sanctions on the Russian metal export industry, leading to a sharp reduction in global palladium supply and push up palladium prices.
Looking back at history, the Gulf War that broke out in 1990, the Kosovo War that broke out in 1999, the Afghan War that broke out in 2001, and the Iraq War that broke out in 2003, the price of precious metals such as gold have all risen sharply in the short term due to the geopolitical crisis.
Of course, there are exceptions, such as the ethiopian-Eritrean border war from 6 May 1998 to 2000, which did not cause sharp fluctuations in the price of gold.
But in general, when the war breaks out, the price of gold will return to calm, which may be because the strength of the two sides of the war is very different, the war process is controllable, the result is completely expected, and then the risk aversion of buying gold gradually fades.
In this Russian-Ukrainian conflict, if there is a war in the later stage, the situation may be different from the previous times, the great power game has reached the point where there is no way to retreat face to face, the price of precious metals such as gold will be determined by the course of the war, and everything may happen.
Nonferrous metals: According to preliminary estimates from the U.S. Geological Survey (USGS), global nickel ore production will reach 2.7 million metal tons in 2021, of which Russia will reach about 250,000 metal tons, accounting for about 9.3% of the total global production, second only to Indonesia (1 million metal tons) and the Philippines (370,000 metal tons).
Considering that Russia is one of the main producers of nickel, and Russian nickel is the main delivery brand of Shanghai nickel, once the Russian-Ukrainian conflict escalates and the supply is disturbed, the price of nickel will be raised.
Copper, Russia as one of the world's major refined copper suppliers, in recent years the output has stabilized at about 1 million tons, accounting for about 4% of the world, of which the net export volume is 600,000-700,000 tons.
If the conflict between Russia and Ukraine intensifies, in the context of low inventories, the supply of refined copper will disturb or cause copper prices to rise, but the outbreak of war will also push the DOLLAR higher, causing some pressure on copper prices, and it is still necessary to continue to track its specific conditions in the later stage.
Aluminum and zinc, Europe's energy shortage has not yet eased, once the Russian-Ukrainian conflict intensified, Russia's anti-sanctions may further exacerbate the situation of energy tension in Europe and even the world, European smelters or face the risk of production cuts, shutdown, the higher power consumption of aluminum and zinc will have a great impact, the price or be pushed up.
Black Plate: Under the premise that the Conflict between Russia and Ukraine does not escalate, the conflict will have little impact on the production and transportation of iron ore in the two countries. Ukrainian iron ore is mainly stored in the Krivorug and Azov-Black Sea iron ore regions, located in the Dnipropetrovsk Oblast of Ukraine, while the conflict area mainly surrounds the Crimean Peninsula, which is far apart, while the two main seaports of Ukraine, the port of Odessa and the port of Ilizeovsk, are located on the southern coast of Ukraine, bordering the northwestern side of the Black Sea, and have little short-term impact.
It is worth mentioning that Ukraine is one of the main exporters of coke, if the transportation is limited, it is bound to push up the price of coke in the European region, considering that the mainland coke is mainly exported, the Russian-Ukrainian conflict has little impact on the price of coke on the mainland.
Agricultural products: Ukraine, with its unique black soil resources, is known as the granary of Europe, its agricultural output is very high, it is the world's largest sunflower oil exporter, the second largest canola oil exporter, the third largest nut exporter, the fourth largest exporter of corn, barley, rye, honey and sorghum.
If the trade of Ukrainian sunflower oil is blocked due to changes in export policies, it is bound to push up oil prices (the mainland is the largest exporter of sunflower oil in Ukraine, with a total of 1.7 million tons of sunflower oil imported by the mainland in 2020/2021, of which 64% came from Ukraine, and in 2020 sunflower oil became the second largest imported oil in the mainland, second only to palm oil).
In addition, corn and wheat are also the main agricultural products of Russia and Ukraine (in 2021/22, Russian and Ukrainian wheat exports accounted for 30% of the total global export volume of 210 million tons), if the Conflict between Russia and Ukraine escalates and the logistics of ports in the Black Sea region are blocked, the corresponding agricultural prices are bound to rise.
Overall, the possibility of a real war caused by the Russian-Ukrainian conflict is still small, and in the short term, it is more fueled by outsiders such as the United States and britain to heat up risk aversion in the market. Before the Russian-Ukrainian relations deteriorated further substantially, they were more emotionally disturbed, and commodity prices were still mainly affected by their own fundamentals.
If war breaks out, sanctions are aggravated, and a black swan event occurs, oil prices break through 100 yuan / barrel or are just around the corner. (Xiaoxiang Morning News reporter Chen Haijun)
Source: Xiaoxiang Morning News
![In an interview with U.S. media on March 19, Ukrainian President Želensky said: "I am ready to negotiate with Putin" and "but if it ends in failure, Russia and Ukraine."[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)