Analysts adjust higher metal price assumptions on Russia-Ukraine conflict

Several analysts have adjusted higher their metal price assumptions for 2022 as the February Russian invasion of Ukraine drags on, wreaking havoc on global metals and mineral supply chains.

Moody’s Investors Service released a report on April 6 flagging spiking prices for commodities Russia is a crucial producer of. These include aluminum, zinc, nickel, copper, gold and metallurgical and thermal coal. Moody’s said the price moves reflected fears of supply disruptions and scarcity at a time of generally low inventories, especially for base metals.

In the wake of the heightened volatility, Moody’s noted that some base metals prices, including aluminum and nickel, approached record highs in the first quarter of 2022, while copper and zinc prices have remained elevated.

Supply-demand balances for these commodities were already tight, with supply volatile amid low stocks and supply-chain disruptions. As a result, prices were high at the start of 2022, before the military conflict.

“Our price assumptions incorporate our expectations that G-20 economies will expand by 3.6% in 2022 and 3% in 2023,” said Moody’s. “China’s GDP will grow 5.2% in 2022 and 5.1% in 2023, reflecting policy support with higher infrastructure spending, tax cuts and measures targeted to specific segments; these factors support commodity prices because China is a significant commodity consumer,” said Moody’s.