Ratings agency Moody´s Investor Services has raised its near-term price assumptions for metals and mining to reflect the heightened volatility in the markets as the Russia-Ukraine crisis tightens commodity supplies, it notes in a new report.

Price assumptions incorporate Moody´s expectations that Group of 20 economies will expand by 3.6% this year and 3% in 2023.

“Some base metals prices, including aluminium and nickel, approached record highs in the first quarter of 2022, while copper and zinc prices have remained elevated.

“Supply-demand balances for these commodities were already tight even before the military conflict erupted, resulting in higher prices,” says Moody´s senior VP Barbara Mattos.

Moody´s has revised up its aluminium 12-month forward price sensitivity range to $1.30/lb from $1/lb, and the medium-term price sensitivity range to $1/lb to $1.30/lb from the previously expected $0.70/lb to $1/lb.

While the 12-month forward price assumption for copper remains at $4/lb, the medium-term price sensitivity range went up to $3/lb to $4/lb, from the previous estimate of $2.75/lb to $3.50/lb.

Russia accounts for 4% of total global copper supply, Moody’s notes.

Further, the 12-month forward price for nickel was raised to $9/lb, from $7.50/lb, while the medium-term price sensitivity range remained unchanged at $5.50/lb to $7/lb.

Production capacity in Indonesia is set to increase considerably in the second half of the year, which has the potential to limit price growth, Moody’s points out.

As for zinc, the 12-month forward price assumption remains at $1.30/lb, but the medium-term price sensitivity range went up to $1.10/lb to $1.40/lb, from the previous $1/lb to $1.30/lb.

At the same time, the updated price assumption for gold in this year is now $1 800/oz - a $100/oz increase.

Coal price sensitivities for both metallurgical coal and thermal coal for the next 12 months were adjusted higher to reflect ongoing supply risks, increased by the military conflict, says Moody’s.

Overall, metals and mining companies will benefit from high commodity prices and sustain profitability above historical levels this year; however, an extended conflict will directly reduce industrial activity and demand for metal and steel, constraining further growth in commodity prices, it states.