The economist assessed the effects of rising aluminum and copper prices on the economy

Rising prices for aluminum and copper will most strongly affect the automotive, electronics, construction and energy sectors. Mikhail Nikitin, Head of the International Business and Finance Practice, partner of 5D Consulting, told Izvestia on April 7.

"The escalation of the conflict in the Middle East can cause a sharp rise in prices for aluminum and copper. Among the reasons is the disruption of logistics chains: the Middle East plays an important role in the transportation of raw materials and finished products, and the closure of the Strait of Hormuz and other key routes will increase transportation costs and delivery times, which will increase production costs," the economist explained.

Additional pressure will be exerted by the rise in energy prices, since the production of aluminum and copper requires significant energy costs. Against the background of geopolitical uncertainty, investors may also increase investments in metals as "protective assets", which will increase demand and push prices up. At the same time, the expert did not rule out a reduction in supply if producing countries were affected.

Nikitin said that China remains the key producer of aluminum, accounting for more than half of global output, as well as India, Russia, Canada and the United Arab Emirates. The main bauxite reserves are concentrated in Guinea, Australia, Brazil and India. Chile is the leader in the copper segment with a share of about 30% of global production, followed by Peru, China, the Democratic Republic of the Congo and Zambia.

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In conditions of high market volatility, companies are advised to review their purchasing strategies. In particular, the use of futures contracts and option instruments will allow prices to be fixed, and the diversification of suppliers will reduce dependence on individual sources. The expert also advises concluding long-term contracts, optimizing the use of metals and investing in the processing of secondary raw materials.

According to Nikitin, it is important for companies to strengthen monitoring of the market situation and flexibly adapt their strategies to changing geopolitical risks.

On the same day, Vedomosti reported that prices for aluminum and copper on the world market this year will rise in the range of 16 to 31% compared to last year's level amid the armed conflict in the Middle East and a decrease in the level of raw material production. This follows from a review by the consulting company Kept (the former KPMG division in Russia).

Prior to that, on April 6, Alexander Schneiderman, head of Alfa-Forex's customer support and sales department, told Izvestia that the precious metals market remains in a correction phase, but quotes are gradually recovering amid expectations of a decrease in tensions in the Middle East. This week, gold may trade in the range of $4,500—4,900 per troy ounce, and silver - in the range of $68-80 per ounce.

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