In a quarterly update, analysts for Citi said geopolitics and markets would be different after the conflict had played out, but the question was how different.
“There are people who believe the results could be as transformative has what occurred after the two world wars of the 20th century,” Citi said.
“There are others who believe that they will be “only” as transformative as either the end of the Cold War or the aftermath of 9/11.”
Citi noted the world was undergoing two challenges simultaneously that affected commodities.
As well as the conflict in the Ukraine, the world was confronting a climate-driven energy transition, which was having revolutionary consequences on politics and markets.
“For 160 plus years the model of global growth has been based on the ample supply of cheap fuels, generating power, fuelling transportation, providing the bases of industrial and agricultural processes,” Citi said.
“Now much of the world has committed to undo all of that in 30 years.”
Citi said it had raised point prices for all commodities, some fairly drastically as a result of actual or feared disruption of Russian supply.
“These are especially noteworthy for oil, nickel, zinc, gold, thermal coal, iron ore and wheat,” it said.
Citi raised its 0-3 month price for ICE Brent crude oil from $US75 a barrel to $US125/bbl and its 6-12 month target from $60/bbl to $US69/bbl.
Its 0-3 month nickel price forecast is $US30,000 a tonne, up from $US26,000t while its 6-12 month price target was steady at $US22,000/t.
“We are bullish on nickel in the near term and our base case is for prices to rally to $US30,000/t on the back of supply constraints which are exacerbating a deficit market,” the bank said.
“In particular, shipping from Russia in containers is a major bottleneck since Maersk announced it would not ship from the region,”
Trading in nickel on the London Metal Exchange was suspended on Tuesday after prices surged to records above $US100,000 a tonne on a short squeeze caused by the world’s biggest nickel producer, China’s Tsingshan.
Citi sees gold at $US1950/oz over the next three months, up from $US1825/oz and gives a new 6-12 month target of $US1750/oz, up from $US1650/oz.
The bank’s three month forecast for iron ore jumped to $US160 a tonne from $US90/t while its 6-12 month target remained static at $US110/t.
“Broadly speaking, price risks are skewed to the upside over the coming month across the metals complex, as logistical issues drive and a buyers strike lead to supply shortages for those metals produced in Russia and the Ukraine,” Citi said.
On wheat, Citi has set a three-month target of $US12.50 a bushel, up from $US8/bu previously.
But the investment bank said SRW wheat prices, which had already rallied 32 per cent since the middle of last month to about $US10.60/bu, could rise a further 35 per cent towards $US14.00-$US14.50/bu if Black Sea exports remained locked out.
