The effects of the rising tensions between the U.S. and Russia have trickled down to the prices of base metals such as aluminum, which experts predict could make a rally soon.
According to MarketWatch, Rusal, Russia’s major aluminum producer, is included in the sanctions, effectively turning the tide in favor of its counterparts in North America. Seven percent of the world’s aluminum supply comes from the said mining firm helmed by Russian oligarch Oleg Deripaska.
A CNBC article detailed that Deripaska is embroiled in a lot of controversies such as money laundering, extortion, illegal wiretapping and racketeering and has denied the allegations.
Under the sanctions, Americans and other nationalities are prohibited from doing transactions with Rusal or else face further consequences. Last year, Rusal registered $10 billion in sales and a lot of it came from the U.S., its second largest trade partner aside from Russia.
On the other hand, the U.S., France and the U.K. have launched airstrikes against Syria, further sinking the damaged relationships between nations and indirectly hitting Russia in the process after it was accused of tolerating Syrian chemical attacks that resulted to 43 casualties and hundred injured.
The Russian sanctions have boosted aluminum’s price as its cash settlement jumped to as high as 18 percent earlier this month, reaching $2,325 a metric ton or $1.05 per pound. Meanwhile, The Wall Street Journal reported that the news of airstrikes on Syria had also impacted the prices of oil as U.S. crude surged to its highest level in four years and rallied by as much as 10.1 percent. Nickel and palladium prices have also increased.
TD Securities commodity strategy head Bart Melek sees the price surge as an aftermath of the trade war between China and the U.S. and not necessarily on the more recent events involving Russia and Syria. “Now we’re kind of thinking that was maybe an overreaction. You’ve got all this geopolitical stuff serving as an added bonus to thinning inventories,” he added.
U.S. producers will likely gain from this episode because those sourcing aluminum from Russia will have no other options but to get supplies from them, especially the major automakers and other foreign companies. Canada and China are expected to step up to fill the potential gap as a result of sanctions on Russia, but the supplies are adequate as of the moment.
If the aluminum price hikes continue, other industries are going to be affected. WTVA 9 News reports that airplanes, soda cans and pharmaceutical packaging, all of which use and rely on aluminum, could also be greatly affected and result in higher commodity prices.
Luxury car makers, which use more aluminum to make lighter and more fuel-efficient cars, would likely increase price tags as a result.
Due to the global impact of the sanctions and new tariffs imposed by the U.S., Treasury Secretary Steven Mnuchin fires a warning that they have to do everything carefully. “You’ve seen the impact on the market. These are very, very powerful tools. We need to do them carefully and thoughtfully,” he stressed.
A glimpse of the muted Economic Winter Season ahead
Despite having a strong global economic stimulus, the country's economic recovery has been at its weakest.
What happens when your aircraft is grounded?
For some travelers, the Federal Aviation Administration’s decision to ground the Boeing 737 Max 8 last week caused a minimum...
The evidence is in: More gender balance means more money
It’s no secret businesses with more gender diversity and gender balance do better.
Addressing critical needs at lower levels of government to result in collaboration initiatives
Local governments are in need of critical funding to protect their citizens and preserve public infrastructure, which will open opportunities...
An in-depth examination of the Dow Jones bear’s eye view from 1885 to 2019
The Dow Jones saw some selling pressure this week, closing down 4.94 percent from its last all-time high of October...
- Featured5 days ago
Spring clean your finances with these 3 tips
- Economy5 days ago
Alternative funding sources of all types readily available for capital projects
- Featured2 days ago
Which cannabis stock is a better buy: Aphria (NYSE: APHA), Canopy Growth (NYSE: CGC) or Aurora Cannabis (NYSE: ACB)?
- Economy1 day ago
High incomes, safety levels main drivers in the economics of happiness