Commodities surged across the board last week as the world imposed economic sanctions on Russia in response to its invasion of Ukraine, with the trend continuing into the second week of March.
Three-month copper on the London Metal Exchange (LME) rose above $US10,500 ($14.35) per tonne on Friday before closing at a record high of $US10.674 ($14.59) per tonne. Three-month aluminium on the LME also scaled to a new all-time peak of $US3849 ($5262) per tonne at close on Friday.
It came as shipments were halted from the Nikolaev alumina refinery in Ukraine. Nikolaev produces 1.75 million tonnes per annum of the metal and is operated by Russian company UC Rusal.
Ami Shivkar, principal analyst for Wood Mackenzie’s aluminium team, said halted Nikolaev shipments could lead to a supply squeeze down the road.
“As a result of sanctions, should counterparties be unable to transact with UC Rusal as was the case in 2018, then there is a risk that all of UC Rusal’s overseas alumina assets could be impacted,” he said.
“In this scenario output from the Aughinish (refinery in Ireland), UC Rusal’s Jamaican refinery and its stake in the Australian Gladstone plant could be stranded and ultimately jeopardised.
“Any significant reduction in alumina production would impact primary metal output in short order leading to even greater primary aluminium market deficits.”
The LME nickel price ballooned as well, with the three-month contract edging towards $US29,000 ($39,645) per tonne at close on Friday. Zinc was also a beneficiary, rising above $US4000 ($5468) per tonne on the LME.
The Newcastle coal price broke through the $US400 ($547) per tonne barrier for the first time ever last week, which benefited Australian coal producers.
At the time of writing, Yancoal’s share price had jumped to $5.08 – a 28 per cent increase in the past five days and 72 per cent increase on the month. Stocks in Whitehaven Coal had jumped to $4.18, representing a similar percentage increase across the past five days.
New Hope Corporation’s share price was $2.98 at the time of writing, up 15 per cent across the past five days and 21 per cent on the month.
As investors flock to gold as a safe haven amid geopolitical uncertainty, prices in the commodity have averaged consistently above $2600 per ounce across the past few weeks. This is a return to the 2020 highs when the post-COVID economic recovery hit full tilt.
On Monday, the World Gold Council gold price closed just above $2730 per ounce.
The iron ore price has also risen amid the global uncertainty. According to Mysteel, the price for 62 per cent Australian iron ore fines was trading at $US160.6 ($219.6) per dry metric tonne at the port of Qingdao on Monday.