"Sharp Rise in International Commodity Prices, Stabilization Expected in Second Half"

Among 11 Major Raw Materials, 7 Have Less Than 20% Production Share from Russia and Ukraine

[Asia Economy Reporter Park Sun-mi] There is an analysis that the international raw material prices, which surged this year, will decline and stabilize in the second half of the year due to the easing of anxiety over the Russia-Ukraine war and increased inventories.

According to the "Analysis of Major Raw Material Supply Chain Structures and the Impact of Price Increases" published on the 5th by the Korea International Trade Association's International Trade and Commerce Research Institute, the proportion of Russian and Ukrainian products in the global raw material supply was found to be less than 20% for most items.

Examining the supply structure of 11 major raw materials, the items with a high share of Russia and Ukraine in the global supply were krypton (80%), neon (70%), palladium (42.9%), and wheat (26.6%). The remaining seven items?natural gas (16.8%), corn (13.8%), crude oil (13%), nickel (11.3%), aluminum (5.6%), coal (5.3%), and copper (3.9%)?all accounted for less than 20%.

The report explained, "Even if the Russia-Ukraine war disrupts the supply of major raw materials, most raw materials will not be significantly affected." In fact, prices of raw materials such as crude oil, coal, and aluminum quickly stabilized, falling more than 10% from their early March peaks. In particular, coal prices dropped more than 40%, from $440 per ton on the 2nd of last month to $258.8 per ton on the 1st of this month.

The report further diagnosed, "The recent surge in raw material prices was caused more by anxiety over the war than by supply shortages," and stated, "After the price surge, raw material prices, which have recently shown a slight sideways trend, will clearly decline in the second half of the year due to the easing of anxiety and increased inventories." Despite uncertainties surrounding the Russia-Ukraine war, crude oil is expected to fall to the $80 per barrel range and coal to $150 per ton in the fourth quarter of this year.

Meanwhile, since rising raw material prices negatively affect companies and consumers, it advised that in the short term, policies such as ▲expanding stockpiles of key raw materials, ▲restricting re-export and hoarding of raw materials, and ▲reducing import tariffs are necessary; and in the long term, policies such as ▲increasing the scope of raw material stockpiling, ▲overseas resource development, and ▲securing raw material processing and treatment technologies are needed to stabilize the supply chain.

Researcher Do Won-bin of the Trade Association said, "It is encouraging that despite the contraction in raw material supply, our exports have maintained a solid growth trend for 17 consecutive months," and added, "In the second half of the year, trade balance will naturally improve due to the stabilization of raw material prices."

This content was produced with the assistance of AI translation services.