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War in Ukraine: “uncertainty fuels the rise” in commodity prices

Novatek, the world's first natural gas liquefaction train production facility in the village of Belokamenka in the Murmansk region, Russia, November 29, 2021. AFP - NATALIA KOLESNIKOVA

Text by: Agnieszka Kumor

3 mins

Crazy day on the commodity markets, after the start of the Russian invasion in Ukraine this Thursday, February 24.

Prices have soared.

From oil to gas, through wheat, sunflower, corn, aluminum, nickel or titanium.

Explanations with Philippe Chalmin, professor at Paris-Dauphine University and co-director of Cercle CyclOpe.

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RFI: What explains why so many raw materials are pushed up?

Philippe Chalmin:

This act of war obviously has direct consequences on a certain number of products exported by Russia and which pass through this area.

First and foremost is natural gas.

And with natural gas, we have a whole set of energy tensions.

With regard to agricultural products, the situation is a little different.

Russia, like Ukraine, are very important

, corn and sunflower.

What explains the surge in prices is of course the concern as to whether the loadings will still be able to take place.

And so, it is the supply of the market from the Black Sea that is questioned.

Hence the rise in prices we are experiencing today.

Finally, with regard to metals, essentially Russian metals, of course, it is the consequence of the dependence of a certain number of industries, particularly European ones, whether on palladium for the automobile industry, on titanium for the aeronautical industry, to nickel, possibly even to aluminium.

With two risks: that which embargoes against Russia wish to impose, that, even conversely, that Russia ceases to deliver.

So, in one case, as in the other, the uncertainty about these supplies from Russia is fueling the rise.

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As the price of a barrel of oil exceeds 100 dollars, for the first time since 2014, how do you see things evolving? 

Oil is finally little directly affected by the conflict, because the rise in prices is lower.

It is linked to the end of the pandemic, and therefore to the recovery of the world economy.

It is linked to the problem encountered by certain OPEC producers who do not have the capacity to respect their production quotas.

And so, paradoxically, I'm not too worried about the oil market.

I doubt that we will go much higher insofar as at this price level, beyond 100 dollars per barrel, we will quite quickly have a new development of production in the United States.

What risk do developing countries face in the face of this general increase in commodity prices

They will suffer.

And sadly suffer in silence.

They will end up with an increase in the

that they will import.

And for some still difficult campaign ends for their food imports.

Egypt has just launched a call for tenders for the supply of wheat within two months.

Egypt is doing relatively poorly and may not find wheat available from the Black Sea, which was its main supplier.

So we will have to find other suppliers.

France is relatively late in its export campaign.

So maybe it will be an opportunity for France.

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