Commodities Take A Major Hit

In the last trading session, there was a reflection of investor fears spreading worldwide over inflation and slowing economic growth due to the war in Ukraine

Both Russia and Ukraine are major manufacturers and exporters of metals in addition to being suppliers of raw materials. The ongoing Russia-Ukraine crisis is impacting the supply and demand, input costs and the overall global economy. Chile, which is responsible for more than 25 per cent of the global copper production, recorded its lowest January output since 2011. The copper prices have shot up by 10.81 per cent due to the war situation. The increasing demand for alternative energy initiative has reflected on the rising red metal price.

The price has gone up from ₹ 758.30 in February end to ₹ 840.30 at the end of the first week of March. It hasn’t been discussed much but rising crude oil prices are raising the cost structure for many synthetic fibres that compete with cotton, causing the cotton price to increase by 0.54 per cent to ₹ 37,191. Lead is now deliverable on the exchange. With this advancement, the domestic lead refiners following the MCX norms are now qualified to supply their produce on the exchange. The lead prices have grown along with other metal prices by 3.65 per cent from ₹ 182.40 to ₹ 189.05.

Due to the war in Ukraine, inflation, and slowing economic growth, fear in the investors all over the world is increasing by the day, as seen in the last fortnight's trading session. This has likely worked in favour of Gold and the metal edged up as investors are moving towards safe haven assets.Gold prices have increased by 3.31 per cent or from ₹ 50,112 to ₹ 51,770 in the last fortnight. The US consumer price data this week is expected to show annual growth which will only add to global inflation. This is going to affect the metal prices that are likely to go up. Zinc prices have advanced by 13.78 per cent in the last two weeks from ₹ 294.70 to ₹ 335.30 in the last week.

Alumina is the raw material used in aluminium production. China, the biggest exporter of aluminium, has been affected in terms of production of alumina due to curbs in its city of Baise on account of the ongoing pandemic. This situation is affecting the supply for producers in the region. This particular metal has jumped by 15.79 per cent in the last fortnight from ₹ 261.80 to ₹ 303.15. Silver prices have also amplified by 4.79 per cent to ₹ 68,047. As the Russia-Ukraine conflict deepens and the attitude of western countries triggers various responses, investors are being driven toward safe haven assets. On top of that, soaring commodities prices have fuelled fears of inflation and rate rise.

This has boosted the metals’ appeal as an inflation hedge drove the prices higher. Meanwhile, Germany has declined to ban Russia’s energy imports and South Korea has said that it’s unlikely to join energy sanctions. The oil prices hit a 14-year high of USD 130.50. Also, higher commodity prices across the board fuelled inflationary and growth concerns. The moves came a day after oil jumped more than 10 per cent before giving up most of the gains after the US said it was considering a ban on Russian oil imports. The prices of crude oil and Brent oil increased to USD 118.11 and USD 115.68, respectively, by 23.82 per cent and 24.86 per cent.