Which Commodities Will Benefit From Sanctions On Russia Over Ukraine?

On Feb. 22, BMO reported that precious metals such as palladium and gold will benefit from the escalating situation in Ukraine and increasing sanctions against Russia, while commodities such as aluminum and nickel are also worth watching. Analysts at Blue Line Futures said tensions escalated in the West in response to Russian President Vladimir Putin's announcement that he recognized two self-proclaimed republics in eastern Ukraine and ordered troops to be sent there as "peacekeepers."

In response, U.S. President Joe Biden said he would release the first sanctions against Russia, targeting two Russian banks and sovereign debt. Biden also called Russia's actions "the beginning of a Russian invasion of Ukraine." Earlier in the day, Germany announced it was halting the certification process for nord Stream 2 gas pipeline imports from Russia. In addition, the EU imposed sanctions on most members of the Russian Duma and banned purchases of Russian government bonds.

This could be just the beginning of sanctions against Russia, which is why the BMO report decided to look at the potential impact on commodity trade flows.

"Ultimately, we expect Russian commodity exports to shift from Europe and North America to Asia," bMO commodities analyst Colin Hamilton said. A change in existing trade routes would lead to temporary disruption of market fundamentals, with precious metals being the commodities most affected by the shortage."

Palladium is the best performer of all precious metals, with Russia accounting for 39 per cent of the world's refined metal supply. Palladium prices have surged 24 per cent so far this year. Hamilton warned that further supply disruptions from Russia could lead to a sharp rise in palladium prices.

“供应的不确定性,加上恢复of auto production, led to higher palladium prices... Russia is expected to account for 9 per cent of gold, 6 per cent of silver, 11 per cent of platinum and 8 per cent of rhodium supply respectively."

In addition to supply concerns, the safe-haven appeal of precious metals is attracting more investors seeking safety from the global stock market rout.

Hamilton added: "Safe-haven investment demand in the market is also stimulating gold prices, which have recovered to around $1,900 an ounce."

Russia is a major supplier not only of oil, but also of several strategic commodities that should benefit from heightened geopolitical tensions in Eastern Europe, said Phil Streible, chief market strategist at Blue Line Futures. With oil and gas supplies tight, crude oil prices could soar above $100 or even $120 a barrel, Streible said.

Other strategic metals such as palladium, copper and cobalt will also benefit further, he said. "Russia is the second largest platinum producer in the world, the first palladium producer, the third largest wheat producer," he said. Wheat prices have begun to rise, up 4.85% so far this year. Russia produces 3.5% of the world's copper. As demand for electric cars increases, copper is one of the main ingredients... Russia produces 4% of the world's cobalt, which is used in batteries for electric cars. So Russia is a very strategic country in terms of commodity production, commodity exports and the direction of the global economy."

Bmo commodities analyst Colin Hamilton added that commodities such as aluminium and nickel were also worth watching, particularly in Europe and North America. Globally, Russian supplies are not necessarily that important, but they are well established in developed markets. Perhaps more importantly, inventories of these commodities are already low. In addition, he expects LME aluminium premiums in Europe and North America to rise in the near term.