Daily Column – 8th March 2022

Commodities, which aren’t the best conversation starter on a first date but are important for everyday life, did their best meme stock impression yesterday with price swings that were out of this world. Nickel, for example, had its biggest one-day dollar gain on record, which is good news for Nickel.

What’s going on now? Commodities are going up because people are worried that the war in Ukraine will make it hard to get important materials. People around the world use goods like food, fuel, and manufacturing to live. Russia and Ukraine have stopped shipping these goods because of port closures and sanctions.

Here’s how the war in Ukraine is causing chaos all over the world.

Energy

Earlier in the day, there were rumours about a possible ban on Russian energy. Natural gas prices in Europe rose to a record high of 345 euros per megawatt-hour. If you didn’t know that prices had never reached 30 euros or 200 euros before last Friday, that might not mean much.

Oil prices kept going up, which meant more money for Americans at the gas station. Gas prices in California have gone up 51 cents in the last week, to an average of $5.34 a gallon, which is a lot.

Food

This is what happens when Ukraine and Russia stop a third of the world’s wheat exports, which is what has happened. Wheat prices have risen more than 50% since the war started.

People in low-income countries, like Egypt and Indonesia, will be hit the hardest by high wheat prices because they rely on grains from Ukraine and Russia. But rising food prices don’t just make dinner more expensive. They also make society more unstable. Last time wheat prices were this high, there were protests around the world.

Metals

In metal markets, Bloomberg said that nickel’s price surge of 76 percent yesterday was one of the “most extreme moves” in history because of how big it was. It’s important for electric cars to have a lot of nickel because it makes stainless steel. Russia is the world’s biggest producer of nickel. Nickel was already in short supply, so this added to the pressure on the price. Two years ago, Elon Musk asked companies to “please mine more nickel,” which means they should.

In the end, the global economy is being hit by another huge supply shock just as it was starting to get back on its feet after the Covid Everything shortage. However, because there isn’t a lot of growth in the economy at the same time, there is a higher risk of stagflation and recessions.

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