Gold prices spiked during the week ended Feb. 25 as Russia invaded neighboring Ukraine and developments sparked concern over the impact of sanctions against Russia and possible retaliation.
The gold price rose to $1,974 per ounce Feb. 23 with the news of Russia's offensive, and it decreased to $1,902/oz the next day as U.S. President Joe Biden imposed sanctions against Russia that were weaker than the market expected, Haywood Securities wrote in a Feb. 25 note.
Russian fertilizer exports are also at risk, although the full extent is unclear, according to CRU Group analyst Humphrey Knight. Belarus, a major potash exporter that borders both Russia and Ukraine, was affected by earlier sanctions the U.S. imposed in late 2021.
Vale SA's executive vice president of iron ore, Marcello Spinelli, said the Russia-Ukraine conflict could strain the global supply of iron ore pellets used to make steel as the two countries represent a significant portion of the world's iron ore pellet production.
Price ring
London Metal Exchange three-month spot aluminum pricing climbed 2.9% to $3,357 per tonne between the week ended Feb. 18 and the week ended Feb. 25. The LME three-month spot copper price ended the week at $9,873/t, down slightly from $9,956/t.
The LME three-month spot price of nickel increased from $24,144/t to $24,361/t. The LME three-month spot price of zinc rose 1.3% to $3,621.50/t.
NYMEX 62% iron ore prices climbed from $141.11/t to $141.79/t.
In precious metals, silver and palladium rose through the week while gold and platinum prices ended lower. Silver climbed 2.6% from a close of $23.91 per ounce Feb. 18 to $24.23/oz by Feb. 25. Over the same period, palladium prices edged up from $2,333.53/oz to $2,357.68/oz. Gold declined from $1,897.05/oz to $1,888.34/oz, while platinum fell to $1,056.43/oz.
Talking points
The conflict between Russia and Ukraine is expected to support the prospect for higher precious metal prices, according to Ole Hansen, head of Saxo Bank's commodity strategy.
"Besides the hard-to-quantify geopolitical risk premium currently present in the market, we maintain our bullish outlook in the belief inflation will remain elevated while central banks may struggle to slam the brakes on hard enough amid the risk of an economic slowdown," Hansen said.
Meanwhile, Wood Mackenzie expects the replacement of Russian coal volumes to result in a price shock to global markets and a coal shortage in Europe. Russia accounts for about 30% and 60% of European imports of metallurgical coal and thermal coal, respectively. A primary issue is Europe's reliance on a certain quality of coal from Russia.
Disruptions to Ukraine's metals production are anticipated to have a small impact globally as the country has limited facilities for metal extraction and processing production.
Financings
Peabody Energy Corp. on Feb. 23 rolled out an offer of $250 million aggregate principal amount of convertible senior notes due 2028 to qualified institutional buyers. Later in the week, the company priced an upsized offering of $275 million aggregate principal amount of 3.25% convertible senior notes due March 1, 2028.
A restructuring plan of an iron joint venture of Brazilian miner Vale SA and Australian miner BHP Group Ltd. was rejected by creditors, Bloomberg News reported Feb. 25, citing sources familiar with the matter. The creditors believe that under the plan, Vale and BHP's Samarco Mineração SA would not be paying a fair share of repairs related to the 2015 dam burst at the joint venture's operations in Brazil's Minas Gerais state.
Saudi Arabia-based Al Masane Al Kobra Mining Co. disclosed Feb. 23 that it plans to raise up to 1.25 billion riyals, or about $333.2 million, for an initial public offering. The company mines copper, zinc, gold and silver, according to its website.