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ALEX BRUMMER: Metals take centre stag as war hits the global economy  

Amid the intense focus on Russia’s enormous role in energy markets, it is very easy to overlook its key place (along with Ukraine) in other natural resources including nickel, palladium and phosphates.

In much the same way as oil and gas are critical to carbon laden energy supplies, so nickel and palladium are critical to the green revolution and phosphates to agriculture. The most public disruption has been in the market for nickel.

Rocketing prices and volatile trading led the London Metal Exchange, the City’s last bastion of open outcry trading, to suspend dealings. 

Shortages: Molten nickel is poured at Nadezhda Metallurgical Plant of the Norilsk Nickel company in the Russian city of Norilsk

This is the first time the LME has taken such decisive action since the tin crisis of 1985-86. The LME also found itself in a spot of bother amid attempts to corner the market for copper, which led to a £1.3billion loss at Sumitomo Bank in 1996.

Moves in the nickel price have been spectacular as Russia’s aggression against Ukraine intensified.

Nickel prices have more than quadrupled over the last week, and dealings were suspended when the three month price for nickel peaked at $101,365 per tonne.

There is a general reluctance among markets to suspend dealing because it locks traders into positions which they cannot unwind. 

Nickel could well add to the pressure on inflation throughout the Western world. It is a critical ingredient of stainless steel and Russia’s Nornickel is the biggest supplier of battery grade nickel which is responsible for 15 per cent to 20 per cent of global supply.

Much of the world’s palladium production, vital to clean emissions for diesel and other vehicles, comes from Russia.

Britain’s Johnson Matthey, as ‘bankers’ for much of the world’s reprocessed platinum related metals, holds large reserves on behalf of major motor manufacturers. So that should help keep prices under control. 

But it is bound to feed into the broader inflation picture and could eventually impact supply chains. No one said the broadening sanctions regime against the Kremlin was going to be anything but disruptive. 

It is starting to reach parts of the global industrial economy which rarely command notice.

New life

Expectations for M&G were never high when it was separated from the Prudential’s high growth Pacific and US arms.

Outflows from the PruFund, the accumulation of assets from centuries of insurance, were unchecked, the group lacked focus and the share price came under pressure leading to speculation that it might be snapped up by a competitor.

Some credit must go to chief executive John Foley, who has begun to turn matters around. Among other things, he has boldly bought into the environmental, social and governance (ESG) agenda. 

Fortunately for Foley, M&G’s exposure to Russia is tiny at 0.1 per cent, which is just as well as he describes the country as ‘uninvestable’. That is ever more so now that the US, together with Britain, has embargoed Russian oil.

There are shards of light in the M&G numbers. Excluding the heritage PruFund, there were net inflows of £600million in 2021. 

Nervous investors might, however, steer clear of riskier equity assets in 2022 given current circumstances. M&G has delivered on cost reduction and achieved its capital generation goal of £2.8billion early.

This enabled it to pull a rabbit out of the hat with a £500million share buyback leading a 15 per cent spurt in the M&G shares.

Standing alone, without the prop of faster growth Pru, shows signs of working.

Gulf allure

What next for the Russian oligarchs as they are turfed out of Londongrad by sanctions? Roman Abramovich found himself a new home and passport in Israel when the UK retracted his business visa in 2018.

A new favoured location looks to be nearby UAE. It has been expanding its offering of international schools, including many modelled on British public schools.

There are plenty of moorings for yachts, even if the region lacks the cachet of the Med.

It has developed as a global aerospace hub and Emirates is home to one of the world’s most admired luxury end carriers.

Doubtless it is taking steps to clean up its act after the Financial Action Task Force, which is charged with combating money laundering, has recommended fundamental changes.

In spite of the appalling violence against the citizens of Ukraine, the UAE has sought to maintain neutrality, choosing to abstain at the UN on the first Security Council vote on the Russian incursion.

Is it laying out the welcome mat?

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