The impact of the Russian-Ukrainian war on the prices of raw materials

Russia invaded Ukraine last week. Nobody should be indifferent to the fate of thousands, and perhaps even millions of people, because the war in Ukraine is, above all, a tragedy that we should first look at in the human dimension. Today, no one can predict when or how the Russian invasion of an independent country will end.

It is also worth noting the business dimension of the war caused by the Russian leader. Certainly, the sanctions imposed on the invader will change the balance of power in the world. Today it is clear that the prices of natural resources will change.

So let’s take a look at the impact this situation may have on the industries we serve.

Impact on Aluminum Supply and Pricing

Russia exports 4-6% of the aluminum supply of the world. When the US sanctioned Rusal’s largest aluminum foundry due to ownership disputes, LME went up by 35% within a few weeks. LME markets are at their historic highs already, with pricing around $3357 last week. Several forecasters see the possibility of aluminum touching $4000 / kg. This is the highest aluminum has ever gone up in its history, ever!

Impact on Nickel Supply

Russia exports almost 7% of raw nickel to global markets. Since the start of the year, nickel (like aluminum) is also trading at its historic high near $24,838 / ton. Nickel is an essential alloy in several blends of aluminum casting and extrusion alloys as well as high strength steels as well.

How long will war continue, and how long will supply disruptions / elevated pricing continue?

These materials are likely to stay high for several months as they are barely getting out of Supply Chain Disruptions from the last 18 months. Given the commitments from both sides and their history of resilience, our thought is that the war will go on for at least 4-5 weeks. Shortages in aluminum, nickel and other precious metals which Russia is a large provider for will suffer higher prices through at least Q3’ 2022.