Critical metals in uncertainty: How Russia-Ukraine conflict drives their prices?

Abstract

Critical minerals bring new challenges to energy security in the transition to clean energy, so their supply and prices are a spectacle of global uncertainties. This research investigates the impact of the Russia-Ukraine war on critical metal prices and the extent to which it affects them. The study will also highlight the price trends in the absence of this geopolitical event. The results outline that the Russia-Ukraine conflict drives critical metals prices. The outcomes show rapid divergence from counterfactual predictions, and the critical metals prices are consistently higher than expected without conflict. The curves suggest a reconvening pattern in metals prices around April 2022. The point-wise causal effect displays an estimate of the critical metal prices increased following the conflict. In relative terms, the prices of critical metals, namely cobalt, nickel, lithium, copper, and aluminum, experienced increases of 2%, 36%, 14.97%, 3%, and less than 1%, respectively. In comparison, the price of lead exhibited a decrease of 8%. The highest increase was observed in nickel, followed by lithium, indicating that these two metals are more responsive to such variations. However, it is noteworthy that prices tend to stabilize and return to pre-event levels from May to September, depending on the respective metal's sensitivity. Moreover, outcomes emphasize that global dependencies, lack of resources and investments, and intentional conflict of crucial minerals exporting nations lead to the conflagration.