Pratima Desai and Naveen Thukral

SINGAPORE/LONDON – Friday saw the biggest weekly gains for commodities in many years. Due to sanctions against Russia and closure of ports in Ukraine, commodity and energy buyers had to scramble for substitute supplies.

Russia is the biggest global exporter of important raw materials like gas, oil and aluminium. Traders and importers are in frenzy over the possible ban on supplies to Russia due to sanctions.

“We are seeing the commodity ‘melt-up’ continue with no sign of a let-up,” ED&F Man Capital Markets’ Edward Meir said.

“More specifically, there’s a large repricing happening which will probably stop when most or all of Russia’s global supply/demand commodities chain contribution is’scrubbed” off the numbers, and discounted by markets.”

Graphic: Global commodities markets ‘melt up’ after Russia invades Ukraine & gets hit with sanctions: https://fingfx.thomsonreuters.com/gfx/ce/klpykbmqypg/CommodsWrapMar42022.png

Chicago Board of Trade’s most-active Wheat contract (CBOT) has gained 40% in the past week. It is also up almost 6%, corn is up 17%, soybeans nearly 6%.

WTI will rise nearly 20%, and then 14% this week after reaching its highest point in a decade. [O/R]

Analysts at UBS stated that Russian energy exports were exempted at the moment from international sanctions. However, exports remain disrupted.

Russian crude buyers have self-sanctioned this in the fear of sanctions or reputational damage. These disruptions, due to Russia’s limited storage capacities, will most likely trigger production cuts (cuts) with some delay.

Aluminium reached a new record of $3,850 per ton, an increase of nearly 13%, and is on track for the largest weekly gain. [MET/L]

Nickel rose to $29,000/tonne for the 11th year, and this week’s gain is more than 16%. It would have been the biggest since 2008.

Wenyu Yao an analyst for ING stated, “Russia is a significant producer of metals, like palladium, aluminum, and nickel…sanctions package currently being announced have yet not to target Russia’s producers.”

“Nevertheless, sanctions on Russia’s access to SWIFT and certain Russian banks have caused great confusion among market participants about trading metals with the country.”

Palladium rose 22% in the past week. Investors worried about inflation, geopolitical, and economic uncertainty and looking to secure their assets, supported gold.

The British and Dutch gas prices more than doubled in the past week, and they are close to records due to uncertainty over Russian gas supply to Europe.

China Benchmark iron ore futures saw their highest weekly gain in over two years with nearly 20%. Newcastle coal futures experienced a more than 67% weekly gain, which is the biggest since contract launch.