Russian Commodities: the long and short side of it

In this report, we review the implications of Russia’s invasion of Ukraine for the key commodity markets, with a particular focus on energy, metals and agriculture. In the short term, the economic challenges of higher commodity prices and physical disruptions are obvious. Our macroeconomists have already reduced their GDP growth estimates by 4ppts for this year and hiked their inflation expectations. However, if the playbooks of the 1970s or the 1990s (when the world lost 5.3mb/d of Russian crude supply) have any relevance, then we would argue, with high confidence, that more energy supply should become available in the medium- to long-term. In the end, the situation with energy supply could look much better – more diversified and likely “greener”. Certain commodities may be much more difficult to replace, even in the medium term, such as palladium, with over 40% coming from Russia.