Alexandros Avramidis via ReutersThe price of aluminum used in many industries has broken new historical records (photo illustration).
INFLATION. The deadly fighting in Ukraine has now been going on for 11 days, and as of Monday, March 7, there are no signs of diplomatic easing. Results? Western countries are stepping up sanctions against Vladimir Putin’s Russia, stock markets are falling, and the prices of many commodities, which have been under pressure for several months due to the economic recovery, are rising a little more sharply due to fears of destabilizing global sourcing.
Producers, buyers and investors are currently worried or expecting major disruptions to exports from Russia and Ukraine, apart from a possible future embargo on some Russian goods.
Backed by the depreciation of the euro against the dollar, this significant price increase is already visible in the prices of fuel, wheat or corn for farmers and consumers, but it will also affect many industries. HuffPost provides an update on the sharp rise in commodity prices.
Gas prices hit historic highs
The most impressive jump occurred with the prices of gas sold in European markets. Europe is far more dependent on Russian gas than the US. The war and sanctions against Russia, which supplies 40% of the European Union’s gas imports, have caused the market benchmark in Europe, the Dutch TTF, to explode. This Monday, March 7, it exceeded 260 euros, breaking a new record, while just a year ago its price was less than 20 euros.
“In our view, the market is now taking it for granted that the very important gas pipeline through Ukraine will be damaged by the fighting,” added an analyst interviewed by AFP on Monday morning. And this despite the fact that Germany has already suspended the Nord Stream 2 gas pipeline project.
In addition, members of the gas exporting countries, including Qatar, have warned that their ability to quickly increase supplies to Europe is limited. The European Union imports 40% of its gas from Russia, France almost 20%.
A barrel of oil above $130
The price of a barrel of Brent oil from the North Sea, one of two market benchmarks, approached $140 on Sunday evening, close to its all-time high of $147.50 set in July 2008. because the ban on Russian exports affects the supply, in particular because some financial and banking sanctions make certain purchases in Russia impossible.
The HuffPostMore than 50% increase in the price of a barrel of Brent in Europe since the beginning of 2022
Faced with the escalation of the war in Ukraine, US Foreign Secretary Anthony Blinken said on Sunday that the United States and the European Union were “very actively” discussing the possibility of a ban on Russian oil imports. President of Ukraine Volodymyr Zelensky also called for this.
However, the Europeans are more cautious, as some states in the region, such as Germany, are heavily dependent on Russian oil and gas. Our neighbor and leading economic partner imports 55% of gas, 42% of oil and coal from Russia. A dependency that the government has been self-critical of since the invasion of Ukraine, but which will take years to decline.
“We will all have to make an effort”, “everyone is paying much more attention to our energy consumption”, “everyone understands that we are entering a new world,” Economy Minister Bruno Le Mayor reasoned on Monday. on BFMTV and RMC, specifying that the answer to the French, “most affected by the crisis” and rising fuel prices, will be provided in the coming days. The price of diesel fuel in France on average last week rose by 14 cents per liter, for SP 95-E10 – by 7 cents.
For its part, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on Wednesday decided to stick with the gradual reopening of the floodgates despite the surge in prices.
As far as energy prices are concerned, oil and gas are not the only products whose prices have skyrocketed. Prices for another highly polluting fossil fuel, coal, are on the rise. Faced with shortage fears in Europe, its price hit an all-time high on Thursday, surpassing $400 a tonne, up from a previous record of nearly $300 in October 2021.
Towards more expensive cars with the growth of mining and metals?
Following energy prices, a sharp rise in prices affected many metals produced, in particular, in Russia. Aluminum, whose production is particularly greedy for electricity, broke the $4,000 a tonne mark for the first time in London, and copper hit new all-time highs. These materials are used in many industries, from automotive, transportation, construction and electronics.
Short of reaching its most recent peaks in 2007, the price of nickel rose by more than 25%. Russia ranks third in the world in nickel production after Indonesia and the Philippines, but ranks second in refined nickel production after China. However, this metal is one of the most sought after on the planet in the factories for the production of electric batteries, which should allow the automotive industry to move away from oil.
The situation in Ukraine is also pushing precious metals up like gold, an investor haven, which topped $2,000 an ounce on Monday morning, hitting its highest level since September 2020. But the star of the precious metals market is palladium. which Russia controls almost half of the world market. The metal, which is mainly used in the automotive industry to develop catalytic converters, has risen more than 50% since the start of the year and is nearing its all-time high.
All these increases, even if scaled down and handed over within a few weeks, are raising concerns about rising construction costs and therefore sales of cars, computers, or even phones, sectors already hit by semiconductor shortages. In addition, some builders have factories in war zones, and this immediately affects production.
Absolute record for wheat, farmers are concerned
The price of wheat, for which Russia and Ukraine together account for almost 30% of world exports, hit a record high on the Chicago Stock Exchange on Friday, beating a 14-year-old record. In Europe, the price of wheat has skyrocketed since the start of the conflict and on Monday reached an unprecedented price of 450 euros per ton.
Due to the conflict, several million tons of wheat, corn or sunflower are blocked in the Black Sea ports, in particular in Odessa. As far as the eye can see, known for its sunflower fields, Ukraine is also the world’s leading oilseed producer and the world’s leading oil exporter, putting pressure on the oil market.
There is concern about the supply of grains to many African countries, which are increasingly dependent on Russian and Ukrainian wheat. During the last food riots, wheat prices were much lower than they are today. France has an export surplus of wheat and corn, but it does not offset the losses caused by the conflict and its impact on the livestock and meat sectors.
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