What’s going on here? Aluminum and nickel prices picked up after the US and UK imposed a ban on Russian metals. What does this mean? Russia churns out a ton of sought-after metals. In fact, 36% of the nickel, 62% of the copper, and 91% of the aluminum stored in the London Metal Exchange (LME) warehouses are from Russia. That’s big: the LME sets metal prices around the globe. So when the US and UK banned new metal deliveries from Russia to the LME late on Friday, investors initially sent aluminum prices up by a record 9.4% on Monday when markets reopened, while pushing nickel 8.8% higher too. That’s because less of Russia’s metal will reach Western markets, forcing them to plug the gap with more desirable – and therefore, pricier – metals from other regions. Why should I care? For markets: Talk about a hot commodity. Commodity prices are up 15% this year and 178% since their pandemic lows. On top of rising industrial metal prices, precious metals like gold and silver have seen double-digit price increases this year, as have energy commodities like crude oil and gasoline. There’s a laundry list of reasons why, including supply chain disruptions, heightened geopolitical risks, a strengthening manufacturing sector that’s hungry for raw materials, and the number of investors flocking to tangible assets now that interest rate cuts are looking less certain. That’s fueling speculation of another commodity supercycle, when prices stay much higher for longer. For you personally: Portfolios need reinforcements. Higher commodity prices feed into inflation, reducing the likelihood of the Federal Reserve cutting interest rates anytime soon. And because stocks, bonds, and cryptocurrencies have benefited from expectations of a trim, they could take a knock if that doesn’t materialize. So popping commodities into a portfolio could protect it from that risk – although if the current climate turns into a recession, commodity prices would likely end up in the dumps, too. | 