Russia, Ukraine and the mining sector

TL;DR

The Russian invasion of Ukraine has exacerbated existing trends in the global resources sector, leading to price impacts on commodities such as gas, wheat, and palladium.

Transcript

hello with me today i have keith watson portfolio manager at the cqs natural resources growth and income trust now there's only one story for financial markets right now and that's the russian invasion of ukraine it's clearly a humanitarian disaster but there's an economic cost too how's the war affected the global resources sector um thanks very m... Read More

Key Insights

• 🌐 The Russian invasion of Ukraine has worsened existing trends in the global resources sector.
• 🫢 Gas prices have significantly increased due to Russia's dominant position in the energy markets.
• 🌐 Wheat and palladium prices have been impacted as well, given Russia and Ukraine's influence on global production.
• 🎭 The CQS Natural Resources Growth and Income Trust had already made investments that performed well during this period, with modest exposure to Russia.
• 💨 The trust shifted its portfolio towards more traditional fuels and away from riskier varieties.
• 🪛 The trust's share price has doubled in value since before the pandemic, driven by supply constraints and the energy transition.
• 🦔 Real assets, like those in the trust's portfolio, continue to offer investors an inflation hedge.

Questions & Answers

Q: How has the Russian invasion of Ukraine affected the global resources sector?

The invasion has exacerbated existing trends, such as environmental improvement and energy transition, leading to supply constraints and price impacts on commodities.

Q: What has been the economic effect of the war on Europe's gas supply?

As Russia supplies 40% of European gas supply, the gas prices have increased significantly, rising fivefold since before the invasion and an additional 60% since then.

Q: How has the war impacted commodities like wheat and palladium?

Russia and Ukraine combined have a dominant effect on global traded wheat and palladium production. This has led to similar price impacts on these commodities as seen in gas prices.

Q: How has the CQS Natural Resources Growth and Income Trust managed its exposure to Russia and Eastern Europe?

The trust had a modest exposure to Russia, but they had already shifted the portfolio towards more traditional fuels and away from riskier varieties. They have accommodated the energy transition at a realistic price.

Summary & Key Takeaways

• The war in Ukraine has impacted the global resources sector by affecting the supply and price of commodities.

• Russia's dominant position in the energy markets, supplying 40% of European gas supply, has led to significant increases in gas prices.

• The price impacts are also seen in commodities such as wheat and palladium, where Russia has a dominant effect on global production.