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How were commodity markets affected by the failed coup in Russia?

Russia experienced domestic tensions between the Russian government and the private military company, the Wagner Group. Yevgeny Prigozhin, former Wagner Group’s boss, accused Russia’s Minister of Defense Sergei Shoigu and Russia’s top general, Valery Gerasimov, of deliberately attacking the Wagner camps in Ukraine with rockets, helicopters gunships, and artillery.

As a response, Prigozhin decided to start a mutiny and marched on to Moscow. The coup was eventually aborted as Prigozhin backed down following a set of negotiations between the Wagner Group and the Kremlin.

The short-lived coup attempt weakened the political power of Putin and also affected commodity markets since Russia is one of the largest oil and gas exporters in the world.

According to Oil Price, The failed coup pushed investors to sell commodities like gold, nickel, cobalt, platinum, palladium, and aluminum, as prices may fall with the potential end of the war. Copper and uranium have been recommended buys. And since Russia significantly contributes to global production, an increase in demand has been projected for these commodities due to their use in clean energy technologies and nuclear energy.

Gold prices are currently trading near record highs thanks to the yellow metal’s status as a safe haven in times of geopolitical instability. Indeed, Russia is the world’s sixth-largest exporter of gold, accounting for 4.4% of global supply. According to Oil Price, an end to the war is likely to usher in risk-on sentiment in the markets, which could lead to a gold selloff.

Russia is the second-largest exporter of cobalt, a key ingredient of rechargeable batteries, and the second-largest exporter of vanadium. Moreover, Russia produced 40% of palladium globally in 2021. The supply of these commodities has mostly remained steady throughout the war and is unlikely to change when the war comes to an end, according to Oil Price.

Nickel prices, on the other hand, have crushed in the current year, falling 21% in the year-to-date to $23,300 per ton thanks to a massive supply glut as Indonesian production continues to outpace global demand. Russia produces 10% of the global nickel supply. According to the International Nickel Study Group (ISNG), the nickel market will face a supply-demand surplus of 239,000 tons, which is the largest in a decade, and more than double last year’s excess of 105,000 tons.

Lastly, Russia accounts for 3.5% of global copper production. BNEF has predicted that by 2030, diverse EV and battery commodities such as copper, manganese, iron, phosphorus, and graphite—all of which are needed in clean energy technologies and are required to expand electricity grids—will see sharp spikes in demand, according to Oil Price. The problem is that the world is facing a potential shortage of copper since there are not enough mines being built to satisfy future demand.


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