What if the West did hit Russia with sanctions that covered the metals and mining sector? That was the question BMO analyst Jessica Fung tackled over the weekend and she took an interesting approach. She posed the question in terms of which commodities China might fully absorb if sanctions went ahead, rather than simply looking at it in terms of the major export items.
The picture here is still instructive, of course. Top of the list in terms of Russia’s share of global supply are: palladium, diamonds, uranium, nickel, and platinum, respectively accounting for 41 percent, 25 percent, 14 percent, 14 percent again and 13 percent of global supply. After that, with 5 to 10 percent of global supply, came: nickel, platinum, aluminum, met coal and silver. Rounding out the list under 5 percent were: iron ore, bauxite, steel, copper, thermal coal and zinc.
What Fung wondered was, of this supply, how much of it could China soak up if sanctions went in place? In all she found there were three commodities China could not fully absorb: palladium, diamonds and aluminum. In other words if sanctions were to wholly hit these sectors – no sure thing of course – global supply would be affected and the impact should drive prices up.
Fung put the rest in the aforementioned supply picture, however, in the price neutral category. She found that China “could theoretically absorb all of Russia’s exports” of platinum, nickel, uranium, silver, met coal, thermal coal and bauxite. Otherwise Russia was a net importer of alumina, copper, iron ore and zinc.