Prices for some key raw materials are substantially inflated and could fall a “long way” if and when concerns ease about the Russian invasion of Ukraine, according to research firm Capital Economics Ltd.
The prospect of supply disruptions stemming from international sanctions have added about 40% to prices for oil, aluminum and copper, Kieran Clancy, a Capital Economics analyst, wrote in a note to clients. Similar premiums probably are swelling agricultural commodities futures, he noted.
“Although there is still huge uncertainty over how the ongoing Russia-Ukraine conflict will play out, markets have been quick to price in the risks to commodity supply,” Clancy said. “We continue to forecast lower prices in the medium term on the assumption that these risk premiums will eventually reduce in size.”
