The accentuation of economic sanctions against Russia has accelerated the trends already underway in commodity prices, which had already been damaged by two years of the Covid-19 pandemic... New historical records have thus been recorded on the markets.
Metals hit hard by the Ukrainian crisis
The price ofaluminum , which had already risen by more than 70% over a year (due to a recovery in global demand, but also to political instability in Guinea), continued to rise, approaching its all-time high (July 2008, $3,380 per ton). Given the current conflict, the strong concerns about supply have only reinforced this upward trend.
Titanium has not escaped this price explosion. This metal, of which Russia is the world's leading producer, is a source of concern for many players in the aerospace sector. Indeed, if we assume that the Russian VSMPO-AVISMA, which holds a little less than 30% of the world market, is linked by contracts to AIRBUS, SAFRAN and BOEING, we can better understand the extent of the problem. In fact, the American manufacturer has just announced that it is severing its relations with the Russian group, a decision that is "easier" to take than that of its European counterparts, given the size of its stocks and its large domestic production.
It should be noted that all metals are experiencing a surge: gold, copper, nickel... The global semiconductor industry, which has already been under severe pressure for the past two years(pandemic), also fears shortages of raw materials such as neon or palladium... which come mainly from Ukraine and Russia.
Energy at the heart of global concerns
And what about gas, whose price is exploding? And Russia supplies 40% of European imports. In France, the tariff shield for individuals, which is in place until June 30, should be exceptionally extended until the end of the year, in order to contain this price increase and support the purchasing power of households, which has already been severely affected by the increase in fuel prices.
"At this price, we will stop driving": at 2.21 euros, the liter of gasoline beats a new record https://t.co/eM2nlpamaz
- Europe 1 ??? (@Europe1) March 9, 2022
Fuel prices have been rising at an alarming rate for several weeks now, with a spectacular jump in the price of diesel, which has already reached the mythical threshold of 2 euros. In this respect, how will French and European transporters be able to absorb such an increase in prices, knowing that fuel is by far the most important item, along with drivers' salaries? In the short term, the price of energy could have a lasting impact on cash flow, thus endangering many structures in the transport sector.
And nothing is going to stop this surge in black gold. Russia, the world's second largest exporter, is at the center of all concerns, with two major scenarios envisaged: Moscow suspends its supply to the West or the latter stops its own imports. In both cases, the impact on the world economy will be devastating, knowing that a price of 3 euros per liter is already evoked ... Not to mention that the dollar has risen again while oil purchases are made in this currency ...
Faced with this explosion in energy prices, the French government has planned to spend nearly 22 billion euros on measures to support purchasing power.
Exploding costs for raw materials, leading to fears of shortages
The Russian-Ukrainian conflict also raises the spectre of a global shortage of many foodstuffs. The Ukraine, the breadbasket of Europe, has seen its agricultural activity stopped; these farms, as well as the supply chain, must be partially damaged or even destroyed.
As a direct consequence, this conflict has already caused the price of wheat and corn to soar (Ukraine is the world'sfourth largest exporter of corn; the country supplies 45% of the European market). Corn, the most cultivated cereal in the world, has seen its price increase by 100 euros in one week... It is unlikely, for example in France, that the price of pork will compensate for this explosion in cereal prices. The situation of many French farmers is therefore likely to worsen in the coming months, knowing also that the price of fertilizers is also exploding due to the soaring price of gas (which represents 80% of the cost of manufacturing inputs).
As for the price of wheat, it reached nearly 400 euros per ton last Friday against 284 euros in November 2021!
A final point on coal. The current conflict is reshuffling the cards in Germany's energy strategy. While the development of renewable energies remains a priority, the postponement of the exit from nuclear and coal is being discussed.
The federal government is urgently seeking to diversify its supplies in order to counter a possible halt in deliveries. And to a lesser extent, it will not be the only country in Europe facing this energy problem.
No improvement is expected in the short and medium term in the rising cost of raw materials. The major shock of the Russian-Ukrainian conflict means that many European countries will have to review their supplies. Such a strategic reorganization will nevertheless be long and financially painful, particularly in view of the current crisis.
