Wheat and sunflower, or titanium, aluminum and nickel: Russia and Ukraine play a key role in the global supply of strategic raw materials for industrial or food use.
Since the start of the Russian invasion of Ukraine, world prices for many of them have soared to unprecedented levels.
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Russia is one of the world’s leading producers of gas and oil, and investors are panicking regarding possible disruptions in the supply of hydrocarbons.
For now, economic sanctions avoid the energy sector, but the United States, less dependent than Europe thanks to its national production, is now talking regarding a ban on importing Russian oil. Russia is the world’s second largest crude oil exporter.
Oil prices, whether North Sea Brent or US WTI, neared all-time highs on Monday, briefly topping $130 a barrel for the first time since 2008.
On the same day, the price of gas reached a historic record in Europe, at 345 euros per megawatt hour. The European Union imports 40% of its gas from Russia.
Russia, which in 2018 became the world’s largest wheat exporter, is “crucial” in feeding the planet, but Ukraine’s export capacities are also of concern. The two countries are a “grain basket” for the rest of the world.
In Europe, the price of wheat has soared since the start of the conflict to reach an unprecedented price on Monday, at 450 euros per tonne.
Ukraine, the world’s fourth largest corn exporter, was on its way to becoming the third largest wheat exporter behind Russia and the United States.
To get cereals out of the country without going through the ports, “the (Ukrainian) train operator wants to export wheat, corn and sunflowers via the rail network to neighboring countries (Romania, Hungary, Slovakia and Poland”, comments the broker Inter-Courtage in a note.
Other countries such as Bulgaria are taking measures to limit exports, Hungary has even banned foreign sales of cereals, which is helping to tighten supply in a market that was already very tight before the invasion.
The supply of cereals to countries such as Egypt, Algeria or sub-Saharan Africa, which are increasingly dependent on Russian and Ukrainian wheat, “risks posing a problem if the boats transporting wheat from the Black Sea are stopped warns Philippe Chotteau, chief economist of the Institut de l’Élevage in Paris.
“Lebanon depends 50% for its food on Russian and Ukrainian wheat. This means that for some countries, it will be more dramatic than for us, the price increases. Over there, there will be shortages”, also fears Christiane Lambert, president of the first organization representing farmers in Europe, Copa-Cogeca.
According to the specialized firm Agritel, “it is on sunflower oil that weighs the greatest danger”.
Famous for its sunflower fields as far as the eye can see, Ukraine is the world’s leading producer of oilseeds and the world’s leading exporter of its oil and “the situation is very tense on the world oil market”, analyzes Sébastien Poncelet, expert at Agritel.
The industrial metals “most exposed” to Russia’s sanctions by the international community are aluminum, nickel and palladium, Capital Economics believes.
The Russian group Rusal is the second industrial aluminum producer in the world. This metal reached a new historic high on Monday on the London Metal Exchange (LME), at 4073.50 dollars per tonne.
For nickel, there’s Nornickel Norilsk, run by oligarch Vladimir Potanin. In 2019, Russia was the third largest producer of nickel ore behind Indonesia and the Philippines, but it is second in refined nickel, behind China.
After the military invasion, Capital Economics estimates that 7% of the global refined nickel market “might be affected” by possible sanctions.
Gold, the metal, which reached a historic high of 55,000 dollars per ton on Monday, is one of the most demanded on the planet in electric battery factories, supposed to allow the automotive industry to abandon oil.
For palladium, which also won an absolute record at 3442.47 dollars an ounce, of which Russia controls 50% of the world market, the automobile is also in the front line. It is used for the manufacture of catalytic converters.
Titanium, a metal prized by aircraft manufacturers for its lightness and very high resistance, is also an indirect issue in the conflict. The Russian company VSMPO-Avisma, founded in 1941 in the Urals, is the world’s leading supplier of aeronautics, according to the general manager of the aeronautical engine manufacturer Safran, Olivier Andriès, who says he has “a few months of stocks” in front of him.
VSMPO-Avisma is also the top supplier to Boeing, which announced on Monday that it has suspended its purchases of titanium from Russia.
