It’s clear just by looking at petrol prices that Russia’s invasion of Ukraine has had a serious impact on commodity markets. There are a few very obvious metals and fossil fuel products that immediately surged as traders sought to get ahead of supply disruptions, like nickel, palladium, oil and gas. Wheat and other agricultural products have also been hit because of Ukrainian supply.
But there is another swathe of comparatively niche products that will become harder to get because of the war. The Evraz (EVR) sanctions will hit the supply of vanadium, a key stainless steel ingredient, given it produces around a fifth of global supply, while Russian titanium and uranium output will also be missed. “The longer the conflict in the Ukraine runs on for and the greater the damage to infrastructure, the more vanadium and titanium raw materials will be lost to the market,” said SP Angel analyst John Meyer. The European ferro-vanadium price is up to over $60 (£46) per kilogramme from around $40 at the beginning of February. Vanadium miner Bushveld Minerals (BMN) is up almost a quarter in the past month as well.
Looking further ahead, global helium supply is under threat as well. Helium is used in high-tech applications like cloud computing and medical scanning - only 8 per cent goes to balloons, according to Helium One (HE1) data. It is largely a by-product of natural gas extraction and a new Gazprom (RU:OGZPY) project in Siberia was supposed to bring the market out of long-term tightness last year, adding around a tenth to global supply by 2025.
But two fires and now heavy sanctions on the Russian state mean it is unlikely to be a solution for some time, said Helium One chief executive David Minchin, who also said rationing was already in place in the market.
Other options are limited as well. Helium One is also some years away from production at its Tanzanian prospect.
“You can’t just click your fingers and bring onstream a new LNG plant,” Minchin told Investors' Chronicle.
Uranium is a more mainstream commodity that has been hit by the war. The US is considering sanctions against Russian state company Rosatom, which accounts for over a third of global uranium enrichment, according to Saxo Bank. “A decision to sanction Rosatom…would tighten an already tight market further,” said Saxo Bank head of commodity strategy Ole Hansen.
The spot uranium price has come down from its $60-plus per pound (lb) level in early March but is still well ahead of the $40 per lb level seen just a month ago. The move away from Russian energy exports in Europe is also helping the sector, said Rob Crayfourd, co-portfolio manager of the New City Investment Managers Geiger Counter fund.
“The unfolding energy crisis is driving a reappraisal of nuclear power’s inherent value and the sector is recapturing credence as a competitive source of clean, baseload generating capacity,” he said.
Overall, it is likely that volatility will be a feature of the industrial input market for the foreseeable future.
