I’m now a week away from a long trip with a five-year-old.
Next Monday, we’re traveling to Zurich, Switzerland. I’ll be spending some time with a close friend and business partner. During that trip, we’ll do a few podcasts that focus on global commodity prices and major trends.
We’ll be talking about oil, natural gas, gold, and copper.
But the big one – the one that few people are focused on right now – is Aluminum.
Like copper, aluminum is a major macroeconomic metal. It’s used in automobiles, consumer goods, electrical equipment, construction, and other forms of transportation.
It’s linked directly to global economic recovery. Rising demand drives rising prices… and people look at those prices to better forecast where growth will emerge in the year head.
But what if we’re about to have a supply disruption again?
What if something is brewing that could drive industrial metals higher – even if the rate of global economic growth is expected to cool.
Pay attention.
U.S. Sanctions Hit Oil. Is Russian Aluminum/Copper Next?
Last year, the oil markets faced pressure after G-7 nations put sanctions on Russian energy shipments. The goal was to dramatically reduce the cost of Russian oil and disrupt the funding of Putin’s war in Ukraine.
Now, nations are starting to target other commodities in Russian production – and industrial metals are now on the list.
Last week, England announced plans to ban imports of Russian aluminum, nickel, copper, and diamonds. It also announced plans to target companies in Russia that reportedly stole grain from Ukraine.
Meanwhile, the U.S. and Canada are taking aim at Russian gold producer Polyus, at a time when Russian gold production remains under severe stress due to sanctions.
Britain doesn’t import a lot of Russian metals, and the London Metal Exchange (LME) has already suspended business with Russian metals producers.
But Russia is a massive producer of aluminum, nickel, palladium, and other major metals. And why is this important? Because the United States has a commitment to reducing emissions through an electrification of the U.S. energy grid.
Simply put: We need metals – from everywhere.
Russia is the third largest producer of aluminum in the world. However, its output is about one tenth of the production of China. The U.S. is ninth overall in production, with the bulk of our imports coming from Canada.
But any serious policy that affects Russia’s exports will create serious problems in a number of other critical minerals that are essential to the Green transition.
Russia is first in nickel production, second in cobalt, fourth in graphite, first in palladium production (43% of global supply), second in platinum, third in aluminum, first in uranium, and third in copper.
Neither Europe nor the U.S. can successfully make this leap without dramatic levels of supply in metals. And any additional sanctions will likely push the relationship between Russia and China even closer.
In addition, these events can further polarize the world at a time when a clear divide is emerging between the indebted, financialized West and commodity-driven nations that are working to de-dollarize from global trade.
As we know, China already has a stranglehold on the global supply chain for rare earth metals and inputs for the solar industry.
Next week, I’ll be talking more about the implications of more sanctions and more uncertainty around economic growth in the future.
To your wealth,
Garrett Baldwin
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
Market Momentum is Green
Momentum remains positive despite concerns about the debt ceiling in Washington. Oil stocks continue to climb higher as concerns about ongoing crude demand abate and investors focus on improving supply balances. Over at Tactical Wealth Investor, we are looking for long-term names in the commodity space that can take advantage of both trends.
