Daily Update: March 14, 2022

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Nickel Trading Suspension Continues

The London Metals Exchange has maintained its suspension of nickel trading, as commodity prices continue to climb to unprecedented highs in reaction to Russia’s intensifying attacks on Ukraine. 

At the epicenter of global metals trading, the LME has found itself caught in the fallout of the Russia-Ukraine conflict. The 145-year-old exchange suspended nickel trading on March 8 after prices for the metal, of which Russia is the world’s fourth-largest producer, surged 250% over two days to a record high of more than $100,000 per tonne, according to S&P Global Commodity Insights. The LME kept its nickel market closed today and said it will continue to do so tomorrow. The shutdown of nickel trading, a move not seen since the exchange enacted a similar suspension of tin trading in 1985, would be reversed when "operational procedures to effect a safe reopening" and analyses of the possibility of "netting-off long and short positions" are available “as soon as practical.” 

"The fallout from Russia invading Ukraine and the subsequent sanctions imposed by the United States and European governments has been a factor behind significantly elevated fears that nickel exports from Russia, one of the world's largest producers of mined and primary nickel, could be disrupted," Jason Sappor, a senior analyst for S&P Global Commodity Insights, told S&P Global Market Intelligence. "This has triggered panic buying in an already tight primary nickel market, underpinning the recent jump in the LME nickel price."

The market reaction to Russia’s invasion of Ukraine, particularly in the form of spiking nickel prices and the trading suspension, reflect industry participants’ concerns about how sanctions will affect the global metals market, how underlying tightness in nickel supplies could worsen if suppliers can’t deliver to the market, and how to control the far-reaching consequences of the crisis. For instance, prolonged high nickel prices could drive up electric vehicle costs as the metal is a key component of the multiple types of lithium-ion batteries used to power them. 

"The fundamental story for nickel was quite bullish before the Russian invasion of Ukraine," Tom Mulqueen, head of research at the metal derivatives broker and dealer Amalgamated Metal Trading, told S&P Global Market Intelligence. "That just added fuel to the fire and triggered this chain reaction of margin calls. You have shorts who have not been able to deliver on their margin calls, and that has just been self-reinforcing in the price. I do not think anyone was anticipating the scale or pace of what we have seen.”

Nickel is one of many metals’ whose price has skyrocketed since Russia first invaded Ukraine on Feb. 24. Major metals benchmarks have moved up significantly since the end of February, and the price of uranium passed $50 per pound for the first time in a decade last week.

Today is Monday, March 14, 2022, and here is today’s essential intelligence.

Written by Molly Mintz.

Economy

Biden's Public Lands Policies In Spotlight As U.S. Oil, Gas Prices Surge

The oil and natural gas industry and GOP lawmakers are clashing with the Biden administration over its public lands policy for energy production as oil prices sit at multiyear highs. Oil and gas output from federal lands makes up a small portion of national production, and the White House and the administration's defenders have noted that many approved leases are not being used. But industry trade groups and Republicans in Congress have said the administration's policies are nevertheless hampering production at a time of market upheaval.

—Read the full article from S&P Global Market Intelligence

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Capital Markets

Style Perspectives In Vogue

U.S. equities have had a tough start to the year amid rising inflation concerns, anticipated rate hikes by the Federal Reserve, earnings misses from several mega-cap companies, and ongoing geopolitical tensions emanating from the Russia-Ukraine conflict. Exhibit 1 shows that the S&P 500®, S&P MidCap 400®, and S&P SmallCap 600® all declined in the first two months of 2022, as did the majority of their respective sector, style, and pure style indices. Energy was a notable outlier, boosted by surging commodity prices.

—Read the full article from S&P Global Indices

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Global Trade

Analysis: Black Sea Conflict May Alter Global Trade Patterns For Grains, Veg Oil

Pressure on global agriculture markets is growing as the Russia-Ukraine conflict enters its third week as prolonged hostilities could force grain and oilseed buyers that rely on the two major Black Sea producers to look elsewhere for their supplies. The disruption of supplies from the region have given rise to concerns over food inflation, especially while global cereal and oilseed prices are at all-time highs. The two countries account for around 26% of global wheat exports. Russia has exported 26 million mt of wheat to date in marketing year 2021-22 (July-June), accounting for 80% of the U.S. Department of Agriculture's estimate for the year, and Ukraine 18 million mt, accounting for 90% of the USDA's estimate.

—Read the full article from S&P Global Commodity Insights

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ESG

Listen: IPCC Climate Report Warns Transformational Change Is No Longer Optional

In the latest episode of ESG Insider, hosts Lindsey Hall and Esther Whieldon talk with one of the lead authors of the IPCC report, Dr. Edward Carr, director of the International Development, Community and Environment Department at Clark University. He was a lead author of the chapter in the IPCC report about climate resilient development pathways, which outlines the role companies and investors can play in adaptation. The good news, according to Ed, is that companies are well-placed to develop longer-term adaptation plans and find new opportunities for transformation. At the same time, companies cannot do it alone. Governments, the private sector, and the public must all work together to adapt to climate change and lower emissions.

—Listen and subscribe to ESG Insider, a podcast from S&P Global Sustainable1

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Energy & Commodities

Key Trends In Iron Ore Market Amid Volatile Trading Environment In 2021

Volatility gripped the iron ore market last year. Huge price movements saw multi-year highs followed by steep falls as supply and demand whiplashed over the course of the months. S&P Global Commodity Insights' Platts 62% Fe IODEX started 2021 at $164.5/dmt Jan. 4 and rallied to $233.1/dmt, an all-time high May 12, before dropping 48.9% from the peak to close at $119/dmt on Dec. 31. S&P Global Commodity Insights unpacks the key trends that emerged in the iron ore market, including much-needed data on topics including brand-level market liquidity, price assessment participation, and pricing mechanisms.

—Read the full article from S&P Global Commodity Insights

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Technology & Media

Around The Tracks: Parts Shortages Stifle Vehicle Production Amid Cutbacks In Russia

The global semiconductor shortage continued to affect vehicle markers production into early 2022. For a second time, in February, Japan's Toyota Motor lowered its production forecast for the fiscal year ending March 31 to 8.5 million units. Its first revision was in September 2021 to 9 million units from an initial forecast of 9.30 million units. In addition to the chip cuts, high commodity prices could hinder recovery plans—Russia's invasion of Ukraine along with high energy costs could keep prices inflated.

—Read the full article from S&P Global Commodity Insights

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