“In a war, there are no longer large abundant metals or small critical metals, since all are strategic”

Grandstand. Not a day goes by that, in a boomerang of sanctions against Russia, anxiety-provoking declarations point to a future “metal war”, a shortage of “rare metals” that would hit our industries. Global stocks are already low due to the post-pandemic recovery and while Ukraine, which accounts for around 9% of European steel imports (in 2021) and exports iron and ferroalloys, sees its logistics infrastructure and some of its metallurgical and mining capacities pulverized by the bombs. This “pro-shortage” choir, a veritable fifth column undermining our will to fight, hopes that what a sanction has done, a cancellation of the sanction will undo it. But first of all, major changes would have to take place at the head of Russia…

Read also: Article reserved for our subscribers Commodities, “last bastion of wild capitalism”

In reality, in times of war or not, the producers of raw materials always need their customers as much as the reverse. The West therefore sanctions according to its interests: the electricity production of the United States depends up to 20% on Russian uranium, Russian gas is essential to Europe, Russian nickel and palladium are essential to both . So far, none of these raw materials are affected by the sanctions. Russian logistics, factories and mines are intact, few physical deliveries of Russian metals are missing, with the exception of some alumina and steel and those related to the indirect effects of sanctions on maritime freight and transport insurance prices.

In a real war, there are no more abundant “great metals” or critical “small metals”, since all are strategic. And there are several tools to overcome possible shortages, if there is a political will to activate them.

Chinese innovations

First, prices can be regulated. The Chinese Tsingshan, the world’s largest producer of nickel, had used derivatives to forward sell the future increase in its production on the London metals market, the London Metal Exchange (LME). Investors had bought his positions, thus ensuring market liquidity. But between February 24 and March 8, the black swan of the Russian invasion, speculation and panic quadrupled nickel prices, with little connection to market fundamentals – supply, demand, cost of production. The sellers were facing abysmal losses, the investment funds with colossal profits. With the risk of a systemic financial crisis added to the war in Ukraine, the LME simply canceled the March 8 prices. Controlling an excessive price by eliminating the obstacle – here the investor – is common in a war economy.

You have 52.84% of this article left to read. The following is for subscribers only.

source site-30