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Highlights
- The Russian invasion of Ukraine coincided with the rally in prices of various metals, which were already rallying due to persisting supply disruptions.
- Russia also accounts for almost 10% of the world's total crude oil exports and is a significant supplier of coal.
- Canada is also hesitating to boost its production capacity to meet the shifting demand due to rampant shutdowns by European producers.
The energy crisis triggered by the ongoing Russia-Ukraine war and the imposition of strict sanctions on Russia by Western nations has disrupted global supply chains that could now curb global growth in the near term.
Sanctions on Russian crude oil, natural gas, and coal have disturbed supplies of key energy commodities, widening the gap between demand and supply, which eventually pushed prices of these energy commodities to multi-year high levels.
Russia’s invasion came when prices of various metals were already rising due to supply tightness. The ongoing energy crisis has adversely affected various sectors of the world, including the European mining sector and South Africa's platinum mining industry.
Good Read: Can Russia-Ukraine war derail Australia's economic recovery?
Let's deep dive to cast a glance at impacts of rising energy costs in the mining industry.
European mining sector
Europe’s mining industry was probably the most severely impacted mining sector due to ongoing energy supply disruptions. The region relies heavily on Russia for most of its natural gas supplies. Additionally, Russia also accounts for almost 10% of the world's total crude oil exports and is a significant supplier of coal. Energy commodities are essential for the mining and industry sectors globally.
Source: © Grybaz | Megapixl.com
The ban on imports of Russian fossil fuel supplies by Western nations has torn global energy supply dynamics. Europe’s steelmaking industry relies either on metallurgical coal or electricity for blast and electric arc furnaces, both of which are either directly or indirectly dependent on metallurgical coal. A ban on Russian metallurgical coal imports has squeezed the steelmaking capacity.
Likewise, miners who don't have much exposure to natural gas are affected by soaring prices of diesel, used to fuel heavy haul trucks in mines.
Additionally, remote mines which don’t have access to electricity and are entirely dependent on diesel generators are hit the hardest by rising energy prices.
Also Read: Russia-Ukraine war: Worsening humanitarian crisis as violence escalates
Miners outside Europe
Not only Europe, but South Africa’s platinum producers are also heavily exposed to soaring energy prices. Though these regions are not as directly affected by natural gas and power prices, local sources of hydropower or coal provide insulation from Russia-related disruptions.
Furthermore, Canada, a key region for aluminium production is also hesitating to boost its production capacity to meet shifting demand due to shutdowns by European producers. Thanks to soaring energy prices, which are forcing Canadian miners to think twice before doing so.
Must Read: What does European energy crisis mean for Australian energy players
Bottom Line
Soaring energy prices have adversely impacted the global mining sector. Miners across the globe are struggling to cope with soaring energy prices, caused by a clash between Russia and Ukraine.
