Crucial commodities that could be affected by the Russia-Ukraine war

Highlights

• Russia’s all-out invasion of Ukraine by air, land, and sea threatens to rattle the global supply chain.
• Russia is one of the largest producers of crude oil and natural gas in the world, accounting for nearly 12% of the world's crude oil and 17% of natural gas. 
• Russia and Ukraine combinedly account for almost 29% of global wheat supplies.

Tensions between Russia and Ukraine have reached a fever pitch as Russian President Vladimir Putin announced a military operation on Ukraine on Thursday. Within a few hours, Russian aircrafts had already made their way to the Ukrainian capital while Russian tanks were seen wheeling on roads of Eastern Ukrainian cities.

Russia’s all-out invasion of Ukraine by air, land, and sea threatens to rattle the global supply chain and disrupt the export of commodities from both countries. At the same time, stringent US and European sanctions on Russia may further disrupt global energy and metal supplies.

Must Read: Gold, Crude oil, and Aluminium: 3 Commodities to keep an eye on as Russia invades Ukraine

Ukraine is considered the "breadbasket of Europe", and impacts of the ongoing crisis between both nations is expected to hit the food supply chain. At the same time, Russia is one of the leading suppliers of crude oil and natural gas. Let's skim through the major commodities exported by both nations and the impact of war on the export of those commodities.

Crude oil & Natural Gas

Russia is one of the largest producers of crude oil and natural gas in the world, accounting for nearly 12% of the world's crude oil and 17% of natural gas production. Most of the European countries are heavily dependent on the Russian natural gas supply.

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The complete suspension of Russia's gas flow amid skyrocketing energy prices and lower gasoline stockpiles could adversely impact European consumers and industries. With intensifying crisis for gas supplies, fertiliser plants in the UK may face a sudden shutdown.

Good Read: How a Russian invasion of Ukraine might impact crude oil prices

Grains

Russia and Ukraine together account for almost 29% of the global wheat supplies. Most of which are shipped from ports of the Black Sea, which have been shut down for now on the Ukrainian side.

The Middle East, Turkey, Egypt, North Africa are among the major wheat importers. Ukraine is also among the world's top four corn suppliers that ships nearly 4.5Mt corn per month. China and the European Union are the biggest importers of Ukrainian corn.

On top of that, both Russia and Ukraine account for nearly 80% of the world's total sunflower oil exports. The escalating war between both nations could severely affect supplies of these food grains into the market.

Crucial Commodities That Could Be Affected By The Russia-Ukraine War

Metals

Russia is a significant producer of metals in the world. The country is the third-largest producer of gold in the world after China and Australia. The country’s total gold mine production accounts for nearly 10% totaling 3,500 tonnes last year, as per the World Gold Council.

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Russia is also the world’s leading producer of rough diamonds by volume, accounting for nearly 30% of the world's total production. India, the UAE, and Belgium are the main importers of Russian diamonds.

Good Read: Shining in times of crisis: How gold prices reacted during major wars

Apart from this, the country also produces 13% of the world’s total potash, phosphate, and nitrogen-containing fertilisers. Asia and Brazil are the main importers of Russian fertilisers.

Russia’s natural resources base is diverse, the country is also a significant producer of aluminium, cobalt, copper, nickel, palladium, and platinum in the world. Nornickel, Russia’s top producer of refined nickel produced 193,006 tonnes in 2021.

Must Read: Crude oil hits US$99.50/bbl as Ukraine crisis intensifies

Fears of sanctions on Russia have increased prices of these metals. For example, prices of palladium reached six-month highs on Thursday after Russia invaded Ukraine while aluminium prices reached decade-high levels on supply risks.

Bottom Line

Prices of various commodities have gained significantly in past few days amid escalating tensions between Russia and Ukraine. The prices are expected to remain buoyed in the near term if tensions between both nations remain unresolved.