SHANGHAI, Mar 2 - As Russia and Ukraine are major suppliers of some commodities in the world, the geopolitical tensions between these two countries has exposed the global commodity market to supply chain risks. Russia occupies an important position in the global crude oil, natural gas and other energy markets, and global energy prices are usually closely linked to global consumer prices. Ukraine is an important exporter of non-ferrous metals and agricultural products in the world. Therefore, if the tension between Russia and Ukraine continues to escalate, it will have a significant impact on the supply of global energy and metals, and the prices of commodities may be at risk of violent fluctuations.

Non-ferrous metals

According to data from 2020, Russia was the fourth largest producer of refined copper, the second largest producer of primary aluminium, and the third largest producer of refined nickel in the world. And according to data released by the Russian Customs, from January to November 2021, Russia's copper exports were 440,500 mt, nickel exports were 45,100 mt, and aluminium exports were 3.19 million mt. One of the main export destinations was Europe. From the second half of 2021 to the present, geopolitical conflicts have triggered market concerns about the supply of non-ferrous metals, boosting the price of non-ferrous metals.

Natural gas

Russia is Europe's largest natural gas supplier. In 2021, it delivered about 168 billion cubic meters of natural gas to the European continent and Turkey, accounting for about 20% of Europe's primary energy consumption and 20% of power generation. Due to geographical friction, the risk of supply interruption of pipeline gas in Russia has greatly increased, which has a great impact on the European natural gas market. Factors such as the suspension of the approval of the "North Stream No. 2" pipeline caused European natural gas prices to rise sharply in the second half of 2021, and also forced European aluminium, zinc and other smelters to stop production. Although winter has passed in Europe, the energy supply is still tight due to the recovery of industrial production, and the energy crisis has not been truly alleviated.

Russia is an important member of the OPEC+ production plan. According to Kpler monitoring data, Russia’s crude oil supply in 2021 accounted for 29% of Europe’s total crude oil imports, and Russia’s output quota for January-February 2022 accounts for about 25% of the total output target of OPEC+. At present, the price of Brent crude oil has reached as high as $96.79/barrel, a new high in nearly 7 years. If Russia's crude oil exports are affected by geopolitical events, the international crude oil price may exceed $100/barrel.

Ferrous metals

Ukraine is an important exporter of iron ore pellets in the world. Its export volume in 2021 was second only to Brazil and Sweden. China imported 3.876 million mt of pellets from Ukraine, accounting for 17% of China’s total pellet imports. Unstable factors between Ukraine and Russia may exacerbate the uncertainty of pellet exports and amplify the structural contradiction in iron ore supply. As a result, the pellet premium may face upward risks and form a certain support for iron ore prices. As far as China is concerned, due to the expected recovery of steel demand brought about by pro-growth policies and the expected production resumption by steel mills after the Winter Olympics, high-quality iron ore will be favoured.