The Significant Impact On Raw Materials of The Russian & Ukraine War

This economic and environmental progress has been under attack since the start of the Russian invasion, setting back hopes for a green and sustainable economy in Ukraine.

The Statista designed a chart highlighting the Raw Materals( Energy, Grains, Metals) prices changes since January 2022, of which are signigicant impact from the Russian war with Ukraine is significant .

Raw Materials Fetch Premium Prices:

Russia and Ukraine have a significant influence on the world economy due to their role as suppliers of a number of essential raw materials. These include fossil fuels, agricultural commodities as well as several metals.

The above chart shows Coal price soared 69% from Feb 24th to June 1st，Wheat price rose 60.1% the same time, U.S. Natural Gas rose 54.6%, Nickel rose 46.5%, Oil rose 29.1%, Europe Natural Gas rose 26.6%, Corn rise 23.9%, Platinum rose 21.3%, Paladiam increased 14.8%, Zinc increased 11.4% in price.

$Wheat - main 2209(ZWmain)$ ,$Micro WTI Crude Oil - Aug 2022(MCL2208)$ ,$Light Crude Oil - main 2208(CLmain)$ ,$Natural Gas - main 2208(NGmain)$ ,$Platinum - main 2210(PLmain)$ .$Energy Select Sector SPDR Fund(XLE)$ .

The latest OECD Economic Outlook states that Russia and Ukraine are the two countries together account for around 30% of world wheat exports, 15% of maize exports, 20% of mineral fertilizers and natural gas exports as well as 11% of oil exports.

According to the report, global supply chains are additionally dependent on Russian and Ukrainian exports of precious metals.

The current energy and food crises have both short- and medium-term implications. Governments need to move quickly and decisively on the near-term issues while working to address the longer-term ones.

Short-term responses concerning energy and fertilisers could include the following:

• Enhance international dialogue and cooperation on energy and food supply security, phasing out trade restrictions on fertilisers can help reduce tensions in food markets. And international discussions should take into account the energy and food nexus.
• Incentivise and enable food growers to increase the efficiency of nutrient use. Applying the right fertiliser source, at the right rate, at the right time, in the right place – can reduce pressure on fertiliser markets by lowering demand without reducing crop yields, or by increasing crop yields with the same application rates.
• Alleviate pressure on natural gas and oil markets by adopting short-term measures to reduce demand. The IEA provided a range of recommendations for policy makers to rapidly reduce natural gas and oil demand. These measures can help ease the strains in energy markets and bring down prices, thereby reducing some of the impacts on fertiliser and food markets described in this commentary.
• Considering the limited LNG export capacity additions expected between 2022 and 2024 and the overall lack of strong policies to transition to alternative fuels, the current tight conditions in global natural gas markets may continue in the medium term. This would mean persistent pressure on margins and operating costs for fertiliser producers, along with continued high prices for consumers.

Measures to alleviate these pressures in the medium term could include the following:

• Design sustainable support structures for insulating the most vulnerable citizens from high food prices. Subsidies and transfers should be designed in such a way that they can be sustained beyond the coming months, should they be needed. Careful design of such subsidies should avoid the unintended consequences of simply shifting or amplifying the exposure to higher prices to other parts of the world’s population. Some low-income countries in the Middle East and Africa are already in the midst – or on the brink – of acute food shortages. Advanced economies have a moral responsibility to consider these countries’ circumstances and ensure their policies do not worsen the situations they face.

• Redouble efforts to replace the use of fossil fuels in the food supply chain with secure, sustainable sources of energy. Decarbonising ammonia production can have the twin benefits of reducing both CO2 emissions from fertiliser production and also the industry’s reliance on natural gas from Russia and elsewhere. Reducing the use of fossil fuels elsewhere in the food supply chain – notably farm equipment, freight and packaging – presents similar opportunities.

Source: https://www.iea.org/commentaries/how-the-energy-crisis-is-exacerbating-the-food-crisis