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

Fri 04 Mar 22, 4:42pm (AEST)
person wearing hard hat standing in front of big yellow mining truck

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Key Points

  • Russia-related commodities continue to trend upwards this week
  • Brent crude almost hit US$120 a barrel

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. 

ICE NewCastle Coal Mar -22 Futures Interactive Chart - Barchart
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
Iron ore futures March (Source: TradingView)

Factors to consider about iron ore include:

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):

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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