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Summary of Russia-Ukraine conflict: how commodities will be affected

Summary of Russia-Ukraine conflict: how commodities will be affected

On February 17, the gunfire in eastern Ukraine once again stirred up the capital market changes. So the question is, how has the situation in Russia and Ukraine fermented in the near future? If the conflict breaks out, what impact will it have on various commodities?

Summary of the recent situation in Russia and Ukraine:

① Prelude to the conflict: U.S. military aid supplies continue to be delivered to Ukraine

In mid-to-late January, the shipment of U.S. military aid to Ukraine suddenly accelerated. The supplies will include “lethal” equipment such as ammunition, according to the U.S. embassy’s Twitter account. — “The United States is determined to help Ukraine strengthen its defenses in the face of Russian aggression”.

At the same time, the Ukrainian army’s tank brigades, mechanized brigades, motorized infantry brigades and other units began to gather in the “Joint Force Operation” area of ​​Ukraine. About 40 special forces soldiers from the Ukrainian army will launch a military provocation in an area several kilometers outside of Donetsk, the Ukrainian civilian armed forces said. These special forces members accepted the guidance of British military instructors.

To prevent an escalation of the conflict, Russia, Ukraine, Germany and France held four-way talks. Russia and Ukraine agreed that all parties should continue to abide by the ceasefire in eastern Ukraine

②Russia conducts military exercises and Ukraine competes against each other:

On February 10, Russia and Belarus held a large-scale military exercise, which is expected to last until the 20th; at the same time, Ukraine also launched an 11-day military exercise.

On February 11, the United States shipped 130 tons of military supplies to Ukraine, including Javelin anti-tank missile systems, patrol boats, sniper rifles and anti-artillery radars. As of that day, the United States has transported a total of more than 1,200 tons of combat supplies to Ukraine.

③The U.S. government speaks out: Russia “may invade at any time”

On February 13, Biden and Putin had a phone call on the situation in Ukraine, but the two sides could not reach a consensus. The U.S. government claimed that “Russia may invade Ukraine at any time”, and many countries began to call for citizens to evacuate. The U.S. media said that “the invasion will happen before the 20th”; Russian officials accused the United States of “hysterically spreading rumors.”

④More than 20 countries from the United States and Europe withdraw from Ukraine:

As the incident continued to ferment, the United States directly closed its embassy in Kiev; at the same time, more than 20 countries followed the United States to evacuate embassy personnel from Ukraine. In Ukraine, 96 top 100 richest people and 37 members of parliament have fled Ukraine. Zelensky angrily denounced the “deserter” behavior, saying that if they do not return within 24 hours, the consequences will be at their own risk.

⑤ Russia announced the withdrawal of troops: but the United States insisted that risks still exist

From February 15 to 16, Russia said it had withdrawn some troops from the Ukrainian border and was open to negotiations. However, U.S. President Biden stated that there are still 150,000 Russian troops “encircling Ukraine” and the possibility of “invasion” still exists; at the same time, senior U.S. government officials anonymously told the media that Russia not only did not withdraw its troops, but also added 7,000 troops, but the possibility of “invasion” still exists. No relevant evidence was provided.

⑥Fighting in eastern Ukraine

On February 17, an exchange of fire broke out in eastern Ukraine. Civilian armed forces in eastern Ukraine said that Ukrainian government forces used mortars and other attacks on their area, and Kiev was trying to escalate the conflict;

The Ukrainian government denies the allegation of the attack, saying that the army was attacked by the Ukrainian civilian armed forces.

After the incident, the OSCE called on all parties to exercise restraint. At the same time, a large number of German reinforcements arrived in Lithuania to join NATO forces. Germany said the troops would be used to deal with Russia’s military activities near Ukraine.

U.S. President Joe Biden reiterated that “every indication” is that Russia is preparing to invade Ukraine. At the same time, the United States has “reason to believe” that Moscow is planning some kind of covert operation to give it a pretext for “invasion”.

The impact of the Russia-Ukraine conflict on commodities:

① Crude oil:

Russia is a big traditional oil and gas producer. In 2021, crude oil production will be about 10.5 million barrels per day. Before the epidemic, the peak of crude oil production once reached 11.45 million barrels per day. Russia’s current crude oil production accounts for about 10% of global production, and it is one of the three countries with a global crude oil output of more than 10 million barrels per day. Its crude oil is mainly supplied to Europe and China.

In the context of short-term geopolitical tensions that are difficult to falsify, oil prices will continue to be supported by geopolitical premiums.

②Precious metals:

Precious metals have always been an important asset for “anti-inflation preservation”. Whether it is the soaring inflation caused by the surge in commodities across the board, or the market’s changing asset allocation preferences due to safe-haven demand, it will bring a bullish atmosphere to precious metals such as gold and silver.

③ Non-ferrous metals:

The Russian-Ukrainian issue constitutes a real problem for European natural gas supply, which has triggered a series of consequential effects. European smelting costs have skyrocketed as gas supplies continue to shrink. If the conflict is further intensified, non-ferrous metals with aluminum, nickel and zinc as the core will usher in market speculation.

④Vegetable oils and fats:

Russia and Ukraine are net exporters of sunflowerseed and rapeseed worldwide; and the port logistics in the Black Sea region, which Europe relies on to import oilseeds, is also affected by the Russian-Ukrainian conflict. Cuisine futures prices will remain strong in the short term once the conflict breaks out. Specific to the variety, rapeseed meal will be stronger than rapeseed oil.

⑤Corn:

Ukraine is my country’s second largest corn importer. According to customs data, my country imported a total of 27.02 million tons of corn from January to November 2021. my country’s corn imports mainly come from the United States and Ukraine. From January to November, 19.59 million tons of corn were imported from the United States, and 7.315 million tons of corn were imported from Ukraine. Ukrainian corn imports accounted for 27%.


Post time: Feb-21-2022