It's no secret that we're in the midst of a commodities super-cycle in 2022.
Experts agree that the upside's been spurred on by a pipeline of macroeconomic catalysts – and this pipeline isn't carrying gas or oil.
Sanctions on Russian exports, loose-running inflation, COVID-19, supply chain bottlenecks, conflict in Europe, commodity shortages, electric vehicle demand – can we name any more? – have all weighed into spot markets this year. This has resulted in price surges.
However, we are now presented with a mix of events that many haven't seen in a lifetime.
As Russia attempts to avoid default on its debt obligations – an event that sent global markets into shakedown when it last happened in 1998 – the US Treasury has dealt its hand once more.
Bloomberg reports the US Treasury has opted to halt dollar-denominated debt payments from Russia's accounts at US banks, further complicating its efforts to meet coupon payments on its bonds.
Here's the take of Gary Kirk of TwentyFour Asset Management (as quoted by Bloomberg):
Clearly the latest announcement by the US Treasury is designed to put additional pressure on the Russians.
The alternative payment methods are significantly more punitive and more challenging for Russia and hence it does increase the chance of a technical default.
What's the fallout from the commodities surge?
The momentum has carried well for those investors tied into ASX 200 commodity shares.
As TMF reported this week, most of the upside for Aussie listed miners in March "was underscored by roaring commodity markets that have continued to surpass all expectations".
"The spillover is set to produce hefty free cash flow yields and potentially record dividends and/or buybacks for ASX miners and their shareholders."
Iron ore has priced at an average US$118 per tonne in 2022 so far, Bloomberg data shows, only marginally down on last year's entire result.
LNG exports are also expected to more than double in Australia this year to $70 billion. Spot prices are likely to remain frothy as well.
Australia could be a benefactor from this surge, not to mention ASX players such as Rio Tinto Ltd (ASX: RIO) and Santos Ltd (ASX: STO).
Their share prices have surged 20% and 28% respectively in 2022 so far. Meanwhile, the sector has seen heavy inflows to exchange-traded funds (ETFs) focused on resources exposure.
The Betashares Australian Resources Sector ETF (ASX: QRE) and Vaneck Australian Resources ETF (ASX: MVR) have also spiked to similar levels and are well in the green.
Not only that, but the price of coal has bottomed for now after lunging to 10-year highs in February. It has since cooled off but ASX coal miners have clipped gains across the board.
As well, investors continue backing ASX coal mining shares as the EU considers a ban on fuel imports from Russia, Bloomberg reports.
Russia supplied around 18% of global coal exports in 2020, it says, and Europe was the largest buyer of its black rock.
Yancoal Ltd (ASX: YAL) has spiked 77% since January 4 whereas Whitehaven Coal Ltd (ASX: WHC) is up nearly 60% at the time of writing.
Meanwhile, the S&P/ASX 300 Metals & Mining Index (ASX: XMM) has powered 17% higher this year to date and is up another 5% in the past month of trade.
