EFG International : Commodity markets and the war in Ukraine

Prices of other precious metals, like palladium and platinum which are also industrial metals mostly used in the automotive sector, have been squeezed consistent with concern about their availability given the dominant role of Russia (see Chart 5b). Beyond a possible de-escalation, one longer-term structural headwind for the prices of platinum and palladium is a faster transition to renewables, including increased demand for electric vehicles, sparked by the surge in energy prices.

Conclusions

In the short-term, commodity prices will remain driven by news flow about the war and sanctions. Over the longer-run, supply from other countries will progressively step in to substitute missing Russian and Ukraine exports. Although this process will differ across commodities, it seems likely that the risk premia currently embedded in commodity prices will decrease, helping prices to moderate.

This is expected to be the case for crude oil, gold, soft commodities and some industrial metals, including copper and aluminium. In contrast, price tensions are likely to persist for those commodities for which supply from Russia and Ukraine has historically dominated global markets, including refined uranium, palladium, nickel and titanium. Also agricultural commodity prices will remain elevated reflecting the increase in input costs like energy and fertilisers.

¹http://go.pardot.com/e/931253/ost-oil-gas-output-2022-03-09-/grkm/34933618?h=oKnRYRQ9Q7C3b28kugQ552V0N_eFcCHwQAW6LQ1T_h0