Global troublemaker Russia creates turmoil on commodity markets

The latest round of sanctions has affected a wide range of commodities from aluminium to oil.

Commodities are booming as materials from aluminium to oil rise to fresh multiyear highs.

Dairy prices also rose for the first time in two months in the latest global auction.

The S&P GSCI Index of 24 commodities has climbed 5% this year, compared with a 0.2% gain for stocks in the S&P 500.

Analysts attribute the rise to increased sanctions against Russia, which is blamed for most of the world hot spots, from the use of chemical warfare in Syria to poisoning attempts on former spies and cyber attacks around the world.

Russia is a key producer of a wide range of commodities from oil to palladium. The increased April 4 sanctions against more than three dozen Russian individuals and entities have jolted raw-materials markets.

One is Oleg Deripaska, whose company United Co Rusal is the world’s second-largest aluminium producer. Under the sanctions, it will be banned from trading on the London Metal Exchange (LME).

Aluminium for delivery in three months on the LME has soared 18% to its highest level in six years.

Russia is an even more prominent producer of palladium, a metal used to scrub emissions in diesel engines, accounting for roughly 40% of global supply. Prices have climbed 12% since the sanctions were announced after tumbling at the start of the year.

Other metals, including nickel, have climbed sharply. Nickel is up 15% this year.

Oil, which is sensitive to conflict in the Middle East, has hit its highest level since December 2014 and has rallied 9.6% this year. US crude futures settled at $US66.52 a barrel.

But some metals without a Russian connection have missed out. Copper prices have fallen 5.7% this year. China accounts for nearly half of the world’s copper demand and is the biggest consumer of commodities in general.

In food, commodities, cocoa futures have risen to their highest point in a year and a half.

They have risen over 40% this year, making them among the best-performing assets this year.

This is the result of reduced supply due to inclement weather in major producers such as West Africa and rising consumer demand for chocolate.

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