As commodity prices hit record highs, futures markets are signalling that elevated prices could persist for months, if not years.

Russia’s invasion of Ukraine has sent prices for key Australian commodities soaring as traders scramble to get hold of supplies amid the threat of sanctions and war disruptions.

Coal, oil, wheat and aluminium have seen prices rise by double digits this year. Along with natural gas, they made up a quarter of export revenue in 2019-20, according to the Department of Foreign Affairs and Trade.

Futures trading, where investors exchange contracts for delivery months or years ahead, are also rising steadily. In the case of oil and coal, futures contracts a year from now are above pre-invasion prices.

Oil, natural gas and coal

Global benchmark Brent crude breached US$130 for the first time in more than a decade on Monday morning as traders reacted to news that the US and its European allies are considering a ban on Russian oil imports.

Futures markets followed the lead. The price for a barrel of oil delivered eleven months ahead broke above US$100 for the first time since 2014 on Monday, up 42% since the start of the year.

Prices reflect worries about supply shortages as Western producers and consumers cut ties with the Russian energy sector despite it being exempt from sanctions, says Dave Meats Morningstar director of energy and utilities.

“They [sanctions] have also made global businesses and financial institutions extremely reluctant to transact with Russia, even in ways not explicitly targeted,” he says. “As a result, traders are finding it difficult to sell Russian crude.”

Australian natural gas exports markets are also booming. An estimate of export prices for liquified natural gas (LNG), tracked by the Australian Competition & Consumer Commission, has almost tripled over the past 6 months. Futures contracts suggest prices could stay that way until March 2023.

Local natural gas exporters can also benefit from higher oil prices because many long-term gas contracts are set using crude oil as a reference.

Similarly, prices for thermal coal used to generate power jumped 50% last week as buyers scrambled for replacements to Russian coal. The country is the third-largest producer in the world and its biggest customers are China, South Korea and Japan, according to Statista. Futures contracts for delivery in March 2023 last closed at US$268.25, above pre-invasion levels.

Higher prices are translating into share market rallies for local producers. Whitehaven Coal (ASX: WHC) is up 27% in the past five days. Woodside Petroleum (ASX: WPL) has added 17%.


Wheat prices should ease over the next two years but are expected to remain high by historic standards due to supply shortages, the Department of Agriculture, Water and the Environment (AWE) said in a note last Tuesday.

Limited supply of high-quality wheat globally means prices should remain around the $400 per tonne level in fiscal 2023, more than double the pre-covid average stretching back to 1980, according to AWE data. Prices are expected to ease from fiscal 2024, depending on the pace of economic recovery.

The Department warned that disruptions to Ukrainian and Russian grain shipments from the Black Sea would lead to higher prices. Russia and Ukraine account for about 29% of global wheat exports.

Reuters reported last Monday that Ukrainian authorities shut ports and halted grain exports until the war ended.

Shares in local grain handler, Graincorp (ASX: GNC), are up 23% since the invasion began.


Aluminium prices are following trends seen across other commodity markets and recording sharp jumps in spot and future prices.

Contracts for March delivery have risen 17% since 22 February. Contracts dated 6 months ahead, for delivery in August, are up 16%, in a sign traders see prices staying elevated.

Russia is the world’s largest producer of aluminium outside of China and is responsible for 6% of global production.

Iron ore

Prices for Australia’s biggest export by revenue have risen steadily from November lows as Chinese officials ramped up stimulus in the world’s largest iron ore purchaser and hinted at an end to the country’s zero-covid policy.

Growth in China is expected to increase demand for steel in construction, industry and other uses. Iron ore is a key input in steelmaking.

Spot price closed on Friday at US$152.28 a tonne, up from $US92 in mid-November.

Futures markets point to prices hovering around these levels for the next year. Contracts for delivery of iron ore one year from now, in March 2023, closed at US$146.09, off spot prices by 4%.

The People’s Bank of China lowered lending rates in January following months of turmoil in the all-important property sector. Chinese manufacturing output has expanded in three of the last four months, according to data from PMI. The Wall Street Journal reported last week that Chinese officials were considering experimental opening measures in select cities.