Ukraine and Russia, key countries in strategic raw materials

Russia and Ukraine play a key role in the world’s supply of raw Materials strategic for industrial and food use. Since the beginning of the Russian invasion, the prices of many of these raw materials have stopped at levels never seen before.

gas and oil

Russia is one of the world’s largest oil and gas producers, and investors worry about potential supply disruptions.

For the moment, economic sanctions carefully avoid the energy sector, but the United States, more independent than Europe thanks to its domestic production, is now talking about banning Russian oil imports.

Oil prices for both North Sea Brent and U.S. West Texas Intermediate (WTI) neared record highs on Monday, briefly topping $130 a barrel for the first time since 2008.

On the same day, the price of gas reached its historical maximum in Europe, with 345 euros per megawatt hour. The European Union (EU) imports 40% of its gas from Russia.

Farm products

Russia, which became the world’s biggest wheat exporter in 2018, is “crucial” to feeding the planet, but Ukraine’s export capacity is also causing concern. Both countries are a “barn” for the rest of the world.

In Europe, the price of wheat has skyrocketed since the start of the conflict, reaching an unprecedented level of 450 euros per tonne on Monday.

Ukraine is also the world’s fourth largest exporter of corn and is on track to become the third largest exporter of wheat, behind Russia and the United States.

Now to get the grain out of the country, “the railway operator wants to export wheat, corn and sunflower through the railway network to neighboring countries (Romania, Hungary, Slovakia and Poland)”, says the Inter-Courtage brokerage company.

Other countries, such as Bulgaria, are taking steps to limit exports, with Hungary going so far as to ban grain exports on Friday.

The supply of cereals to countries such as Egypt, Algeria, the Middle East and even Africa, which are increasingly dependent on Russian and Ukrainian wheat, “may be a problem if the ships that transport wheat from the Black Sea are stopped,” warns the economist. French Philippe Chotteau.

According to the specialized cabinet Agritel, “sunflower oil is the one that is most in danger.”

Famous for its endless sunflower fields, Ukraine is the world’s largest producer of this oilseed and the largest exporter of its oil.

But “the situation is very tense in the world oil market. There are few stocks of soybean oil in Latin America and of palm oil in Indonesia and Malaysia, while demand is very strong”, analyzes Sébastien Poncelet, an expert at Agritel.

industrial metals

The industrial metals “most exposed” to sanctions against Russia by the international community would be aluminium, nickel and palladium, according to Capital Economics.

The Russian group Rusal is the second largest industrial producer of aluminum in the world. This metal reached another all-time high on the London Metal Exchange (LME) on Monday, at US$4,073.50 per tonne.

As for nickel, there is Nornickel Norilsk, led by the 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 after China.

Following the invasion of Ukraine, Capital Economics estimates that 7% of the global refined nickel market “could be affected” by possible sanctions.

The metal, which is also breaking records in the markets, is one of the most coveted on the planet for use in electric battery factories, which should allow the car industry to move away from oil.

In the case of palladium, which is also reaching an all-time high of US$3,442.47 an ounce, and for which Russia controls 50% of the world market, the automobile industry is also at the forefront. It is used in the manufacture of catalysts.

Titanium, a metal prized by aircraft manufacturers for its lightness and high strength, is also indirectly affected by the conflict. The Russian company VSMPO-Avisma, founded in 1941 in the Urals, is the world’s leading supplier to the aerospace industry, according to Olivier Andriès, CEO of the aeronautical engine manufacturer Safran, who claims to have “a few months of stock”.