Commodity spotlight: Russia-linked commodities surge, iron ore finds its groove

Coal is here to stay 

Newcastle thermal coal futures for March delivery spiked 40% on Thursday to $440 amid growing market concerns about shortages as Russia-Ukraine conflicts escalate. 

Source: Barchart

Prices pulled back -16% on Friday, but still more than double year-to-date.

Russia could leave a massive hole in Europe's coal supply, and there doesn't appear to be an immediate solution to fill that supply gap.

Renewable energy solutions remain unreliable, while nuclear solutions take years to develop.

Investors should keep an eye out for coal prices next week. If the parabolic rise continues, local coal stocks could continue to benefit.

Iron ore finds its groove

Iron ore has struggled to find upside for the past two weeks as Chinese market watchdogs clamp down on any malicious domestic activities that might be influencing prices.

While the regulatory move might have weighed on sentiment, demand and supply forces prevailed this week, pushing iron ore prices to a 6-month high of US$153 a tonne.

Iron ore futures March (Source: TradingView)

Factors to consider about iron ore include:

• Ukraine is the world's 6th largest producer

• BHP (ASX: BHP) and Rio Tinto (ASX: RIO) missed 2021 production estimates

• Potential cyclone risk in WA

Oil: choppy but elevated

Brent crude prices peaked just shy of US$120 a barrel on Thursday.

"What we’re probably seeing here is some profit-taking because the price has risen so far so fast. I would be surprised if upward pressure on oil prices doesn’t resume unless something fundamentally improves," said Oanda senior market analyst, Ed Moya.

"That could temporarily come from a nuclear deal with Iran. But even this would not be enough to offset a disruption to Russian exports."

Aluminium goes parabolic

Aluminium prices have gone straight vertical, pushing past US$3,800 a tonne, up almost 20% in March.

Prices were already trading near all-time highs before the Russian invasion.

Russia producers approximately 6% of global aluminium, so the potential supply concerns have further fueled the price rally.

Several other Russia-tied metals have also experienced sharp price rallies, including (links to spot prices and ASX company lists):

• Nickel

• Palladium

• Platinum