news agency
Crisis in Ukraine would worsen energy and food inflation

Crisis in Ukraine would worsen energy and food inflation

The tension around Ukraine is intensifying. The prospect of sanctions on Russia threatens to further increase the prices of key commodities for the world economy.

The United States and its allies have warned that Vladimir Putin could invade Ukraine, something Moscow has repeatedly denied.

Markets have been on edge for weeks, and an actual conflict, or sanctions, could drive up energy and food prices further, and push Europe into a major supply crisis.

Rising geopolitical tensions further amplify the commodity problem, given Russia’s far-reaching impact on global commodity markets”, said JPMorgan Chase & Co. in a report.

The sanctions could trigger food and energy shortages, sending prices of both skyrocketing, Bloomberg Intelligence said recently.

These are some of the possible consequences for the markets of the main raw materials.

gas impact

One of the biggest shocks so far has been on Europe’s gas markets. Geopolitical tensions have been amplified by already limited supplies from Russia and below-average stocks, with prices in the region nearly quadrupling last year.

A full-fledged conflict could disrupt the massive volumes Russia ships to Europe, about a third of which typically comes from Ukraine.

The sanctions could affect trade and prevent the new Nord Stream 2 pipeline from directing Russian gas to Europe. All of that could have a big impact on inventory replenishment in the summer, which would also make it difficult next winter. Prices could rise further and destabilize the European economy. Russia would also lose huge amounts of revenue.

Food and fertilizers at risk

One of the worst consequences could be rising food prices. Ukraine and Russia are major producers of wheat, corn, and sunflower oil. Shoppers from Asia to Africa and the Middle East would be subject to more expensive bread and meat if supply is disrupted. The costs of food staples are already the highest in a decade.

The share of Russia and Ukraine in world exports has increased, and nations such as Egypt and Turkey depend on the agriculture of the Black Sea countries.

Russia is also one of the world’s largest exporters of the three main groups of fertilizers. Any cut in supply can cause an increase in already high nutrient prices, affecting crop productivity and worsening food inflation.

metal shortage

Even short-lived outages could have a huge impact at a time when manufacturers are already facing critical shortages of metals, from aluminum to zinc. The consequences could be particularly severe in the palladium market, where Russia accounts for about 40% of the world’s supply.

The country is less dominant in base metals, but remains one of the world’s top suppliers, with JPMorgan estimating it accounts for 4-6% of global production of refined copper, aluminum and nickel.

oil rise

Any disruption to oil flows from Russia, and low production capacity in other countries, could easily push up oil prices. JPMorgan analysts tested the possibility of a peak at US$150. Prices in London are approaching US$100 a barrel.

About half of Russia’s oil and condensate exports go to Europe. Disruptions could wreak havoc and force trade routes to change.

Source: Gestion

You may also like

Hot News

TRENDING NEWS

Subscribe

follow us