Finance Monthly - May 2022

32 Finance Monthly. Bus i ne s s & Economy As Russia accounts for 49% of world nickel exports, the RussiaUkraine crisis has led to a shortage of the base metal, causing its price to spike. Further to this, the conflict has prompted short-covering by businesses, including the Chinese group Tsingshan – the world’s largest nickel and stainless-steel producer. Short covering is the process of purchasing borrowed securities to close out an open short position at a profit or loss, while it also involves the purchase of the same security that was initially sold by the holder of the position. As such, this action has further contributed to driving the price of nickel up, with the London Metal Exchange forced to halt trading in nickel on Tuesday 8th March after prices surged 110% to top $100,000 per tonne. Prior to taking a closer look at the expected price increases of commodities, it is worth mentioning that the following estimates have been calculated using a combination of a statistical price forecast model, in tandem with leveraging monthly and daily price data over the last 20 years. This has allowed for sensitivity analysis to take place, whereby the dynamic impact of similar conflicts and resulting sanctions on commodity prices can be evaluated – like the 2014 RussiaUkraine conflict. The expectation is that the continued military conflict in Ukraine is set to see the prices of a range of commodities increase sharply in the short term. For example, the prices of crude oil, palladium, platinum, and aluminium are in line to go up, due to Russia being a major producer and exporter of these raw materials. Looking at this in more granular detail, the price movement (between March 2022 and May 2022) of crude oil is anticipated to be between 10 to 12%, as Russia is the secondlargest producer in the world, meaning there is the possibility of disruption to crude oil supplies. Adding to this, metal prices are

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