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Russia and Ukraine's Importance in Commodity Markets

With tensions ratcheting up between Russia and Ukraine, we look at their supply importance across an already tight commodity market.

Written by Bentley Atteberry, Daniel White, Victor Koister, and Andy Zhu

February 14, 2022,

UPDATE: February 15, 2022

At approximately 8:00 GMT today, February 15th, Interfax reported that a number of drills have finished and troops were expected to return to bases. This headline sparked a reversal of some of the premium priced into various commodities over the Russia/Ukraine tensions. While it is uncertain what will happen next, the below breakdown of the two country's importance in the commodity markets remain.

Late Friday afternoon/evening (February 11, 2022), headlines flashed of an imminent Russian invasion into the Ukraine. Although this was certainly not the first Russia-Ukraine headline to come out, this one resulted in probably the sharpest market reaction yet. Russia, and to a lesser extent Ukraine, are key suppliers in several of the key commodity markets. Western politicians have assured that a full-blown invasion by Russia into Ukraine would result in economic sanctions on the Russian Federation. While no one yet knows what those sanctions might be, previous actions taken by Western Allies against Russia have included sanctions against companies that produce and export a variety of refined commodities. For the past few years, commodity markets have been tightening up as years of under-investment in several key sectors has caught up with the markets. Taking out even a minor amount of materials from some of these markets could have a large impact on the supply/demand balance and overall global manufacturing supply chain. While we are not here to speculate whether a war will happen or whether specific sanctions will be handed out, we do feel it is best to at least be aware of potential impact areas. With that said, below is a brief rundown of the importance of Russia and Ukraine in various commodity markets.

Grains Russia and Ukraine are two of the largest grain and oilseed exporters in the world which makes the Black Sea region vital to the global agriculture trade. Although it is unclear at this time if Black Sea exporters would cease operations or be disrupted, it is important to analyze the risks. Russia is the world's largest Wheat exporter and Ukraine is the fourth, only slightly behind the United States. Ukraine is also a top five exporter of Corn and has replaced the U.S. as China's main source of imports this season. Russia and Ukraine are also some of the world's largest exporters of Barley, Canola, and Vegetable Oil.

Thousands of Tonnes




Wheat Production

% Global







Wheat Exports

% Global







Corn Exports

% Global







Major Veg. Oil Exports

% Global







Barley Exports

% Global







Canola Production

% Global







Canola Exports

% Global







Grain exports out of the Black Sea did carry on throughout the Crimea annexation in 2014 with only minor disturbances. Currently, global balance sheets across grains and oilseeds are at their tightest levels in decades. In the event of a significant disruption to Ukrainian export operations, global Corn importers would likely shift purchases to the U.S. until the harvest of Argentinian and Brazilian crops are completed. Wheat importers would shift purchases to France, the U.S., Argentina, Australia and to some extent India. Black Sea Feed Wheat customers would likely shift their feed-grain to Corn and China would likely have to roll a significant level of Corn purchases to the U.S. Gulf region.


Russia is one of the most important suppliers in the global energy markets. For crude oil, they currently produce around 11 million barrels per day. Additionally, they are a top 3 exporter making up around 10% of global exports. Under a scenario where their products may be sanctioned, European countries would feel the pain the most as Russia is their largest partner making up for around 27% of EU petroleum imports. Russia's Far East customers may benefit by taking in a chunk of those barrels at a discount, however, it is difficult to see a scenario involving sanctions where the supply to the rest of the world is able to maintain its current pace.

On the flip side, producers in the Arabian Gulf and North America would benefit as medium-sour grades become sought after to make up for a loss in Russian oil.

Although the Crimea situation did not result in a price spike in oil prices, the sanctions imposed by the United States in 2018 did. 2014 occurred during the price collapse from the shale oil boom, which makes it a difficult barometer to use when comparing to the much tighter fundamentals of the present. While nothing is clear on potential actions, it is fairly clear that an absences of Russian products would put further stress on the supply side of the markets.

Global Natural Gas markets rely heavily on Russian supply. Gas sales from Russia in 2020 topped 200 billion cubic metres, representing about 16% globally. Although that share is lower than a decade ago, Russia will continue to be a key pillar in the global gas markets.

Russian exports to Europe have been on a steady decline since 2015 (-26%). This is partially due to the 2020 commissioning of the Power of Siberia pipeline which is expected to send 38 billion cubic metres per year to China by 2025. This fall in exports can also been seen in the flows from the three main export pipelines from Russia to Europe.

The Nord Stream 2 pipeline has been anticipated for the past several years as it would add additional capacity of 55 billion cubic metres per year to Europe. Politicians, even from outside of Europe, have suggested that a Russian invasion into Ukraine would result in the cancellation of the Nord Stream 2 pipeline. Considering the current elevated and volatile price environment for European electricity prices, further tightening of their Natural Gas supplies with limited other quick replenishment options may result in higher prices for longer.


The global steel markets consist of a complex web of tariffs and quotas on a variety of refined, semi-finished, and finished products. That is not to say that further quotas, tariffs, or outright bans cannot be placed on products; however, such an action would cause a disruption to already tighter markets for the steel goods key to construction, infrastructure, and auto production.

The Black Sea region is key for steel with Russia as a top 3 steel products exporter with Ukraine also a top 10 exporter. Russian steel exports hold a 7.5% global market share with their most dominant position coming from semi-finished goods where they are the top exporter representing 27% of exports globally. Ukraine comes in at number three globally accounting for 15% of exports.

While Russian steel export destinations are diversified, numerous European countries buy substantial chunks of Russian metal. 13% of imports of finished steel goods to EU 27 countries come from Russia, while a further 8% come from Ukraine. This means any disruption to Russian or Ukrainian exports would force European consumers to scramble for supplies from elsewhere.

The DRC and China are the two leading suppliers in the Cobalt markets with the former being the top concentrate/ore producer and the latter being the top producer of refined Cobalt. After that, it is a mixture of countries that contribute to global supplies. Russia's cobalt production was 9kt (6.3% of total 142kt) in 2020 and 7.6kt (4.5% of total 170kt) in 2021. Nor Nickel is the only Russian Cobalt producer as of 2020 (their cut cathodes are an LME registered brand). China consistently imports more than 60% of global production of cobalt ore (136kt in 2018, 90kt in 2019). Given Russia's small but relevant contribution to cobalt production, along with China's fluid geopolitical stances, the Russia-Ukraine tensions could provide a mild positive impact on Cobalt prices.

Perhaps the most notable previous example of a sanctions shock in the base metals space was back in April of 2018 when the United States Treasury department slapped sanctions on Russian Aluminium producer, Rusal and Oleg Deripaska. The shock was felt immediately with benchmark aluminium prices rocketing up 35% in the matter of days while the difference between cash prices widening to more than $50 above the 3-month forwards. This event also sparked mass cancellations of warrants from LME warehouses due to fear from consumers (or merchants) of not being able to buy refined metal from Rusal. The US lifted these sanctions less than a year later in January of 2019.

The reason for that reaction is due to Russia's importance as a supplier in the global primary aluminium markets. They are the largest exporter of primary aluminium at over 3.2mln tonnes in 2021 and are the second largest producer at 3.92mln tonnes in 2021. In August of last year, Russia imposed an export tax that included primary aluminium and exports became front loaded to July. While exports of the metal did continue after August*, the amount of refined metal leaving the country on a monthly basis did slow. It will be crucial to see what happens here as the global aluminium markets flipped to a fairly severe deficit in 2021 with 2022 looking to be even tighter. Additionally, Russia is forecast to be one of the few regions of supply growth in 2022 with Rusal's hydro-powered Taishet smelter coming online in December 2021 with a capacity of 428,500 tonnes per year.

Metal can certainly change destinations and markets can attempt to rebalance like they did in 2018. Prior to sanctions, Russia was one of the top suppliers to the United States for primary aluminium; however, in the past few years, shipments from Russia to The United States have plummeted from over 700kt in 2017 to less than 200kt in 2021. The issue is that moving away from Russian metal this go around would be tricky as supply is already limited, shipping logistics are causing bottle necks, and global warehouse inventories (on exchange and off) are pushing multi-decade lows. Russia also typically supplies the EU-27 countries with around 25% of their annual primary aluminium needs. This could cause a headache for western countries as smelters also struggle to keep open amid a rise in energy prices.

Copper production is most commonly tied to Latin America (Chile and Peru) and China; however, Russia actually produces a little over 4% of the world's refined copper annually at over 1mln tonnes in 2021. This was fourth behind China, Chile, and Japan. Most importantly, Russia is the third largest exporter of refined copper globally behind Chile and Japan. There is a twist as well since Russia implemented their export tariff in August*, they shifted to exporting semi-finished products and became the third largest exporter of semis behind China and Germany. While that export tax has since been lifted, the drain in visible inventories of copper globally has continued to come under pressure. Further restrictions of Russian metal from the markets could put markets in a bind as visible inventories globally sit around 15 year lows much like aluminium.

While Platinum is typically associated with South Africa (over 70% comes from South Africa) and Silver mining is typically associated with Latin America, Russia indeed plays a key role in the supply of both metals. For Platinum, Russia stands as the second largest producer at 13% of global production in 2021. Silver is a bit different since over 70% of the precious metal comes as a by-product in mines that target Lead, Zinc, Copper, or Gold. With that said, Norilsk and Russia play a key role accounting for roughly 4.5% of global silver supply annually.

Lastly, Russia is home to the world's largest producer of Palladium and Class I Nickel, Norilsk Nickel. In early 2021, two of Nor Nickel's arctic mines suffered accidents leading to a shut down in production. Oktyabrsky mine returned to full production by the middle of May but the Taimyrsky mine did not get back up and running until December (according to Nor Nickel's 2021 Financial results release). These key outages already had an impact in both the Nickel and Palladium markets last year, although Norilsk did help stabilize Palladium markets by selling a large chunk of their reserves. Auto producers remain reliant on Russia for Palladium as they account for over 40% of global supply annually. On the contrary, Nickel Metal exports essentially halted last year while most of the rest of the world was starved for class I nickel, particularly briquettes (briquettes can be used in stainless steel production and can also be dissolved into nickel sulfate which is used in the ternary precursor cathodes for NMC batteries primarily used in electric vehicles). Prior to 2021, Russia was the largest exporter and second largest producer of Class I Nickel (Several Nor Nickel products are LME and SHFE (Shanghai Futures Exchange) deliverable brands).

The absence of Class I Nickel from Russian markets since early 2021 has been felt globally as demand from the EV sector has increased for either Nickel Sulfate or Nickel Briquettes (to dissolve into sulfate) (Note that briquettes are also used in the stainless steel sector and nickel sulfate is also used by electro-plating producers along with cathode producers for EV batteries). Premiums globally have rocketed higher as inventories plummeted bringing up memories of the 2007 squeeze that blasted LME prices above 51,000 per tonne (prices closed just above 23,000/tonne on February 11th).

Nickel best summarizes the current theme in these commodity markets. Current supplies are tight, demand is increasing for various materials at above trend pace, inventories globally are running somewhat thin, and Russia and Ukraine are right at the center of it all as key suppliers across a spectrum of commodities.

*Russia imposed various export duties from August 2021 through December 2021 including a 15% tax on ferrous and major base metals exports. Russia decided not to roll over those duties in 2022, however, duties on Wheat remain.

By Bentley Atteberry, Daniel White, Victor Koister, and Andy Zhu

Myst Capital offers market research and commentary. Our market research is intended to simply be insights, commentary and research for those who are interested in this information. This research is not a solicitation for investment with Myst Capital nor should such market research be construed as trading advice to buy or sell any specific financial investment. The above commentary, insights, and research may or may not fully represent the opinions of the entire Myst Capital team and is not intended to be indicative of any investments.


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