Entry Points | Commodities Amid Conflict

The war in Ukraine and sanctions against Russia are already reshaping the agriculture, metals and energy markets.

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Catalysts in Play:  Investors in domestic and global equities were already contending with a shifting backdrop spurred by inflationary pressures and the ongoing supply chain disruptions stemming from the pandemic. Russia’s invasion of Ukraine adds another variable that will have an outsized influence in certain areas of the commodities market and create a domino effect that has the potential to introduce new risks and open up new opportunities for investors.

Entry Points:  For instance, combined Russia and Ukraine account for approximately one fifth of the total export trade of wheat and has a similarly influential role as a producer of corn, sunflower oil and potash, used in fertilizer. Within metals, Russia alone accounts for over 40% of the global supply of palladium, nearly a third of the global diamond supply, and is among the most significant producers of platinum, rhodium, nickel and other metals. But it’s the energy segment, in particular, where the impact of the ongoing conflict may be most acute.

Oil Supply Shrinks as Demand Keeps Growing: The oil market was already dealing with a structural deficit prior to the conflict, which has been exacerbated by the war in Ukraine and following the sanctions against Russia, which accounts for nearly 10% of the global oil supply. As demand is expected to reach pre-pandemic levels later this year, an additional investment of $30 billion to $40 billion, over 2021 levels, would be required for U.S. oil operators to produce the roughly one million barrels per day required to meet growing demand.

Europe Squeezed by New Natural Gas Constraints: Russia also accounts for 17% of the natural gas supply globally and 40% of Europe’s natural gas consumption. Depressed investment in recent years had already created tight conditions in the global natural gas markets. In Europe, leaders have signaled a potential shift to liquefied natural gas, but the infrastructure required could take several years to put in place, suggesting natural gas prices could remain elevated for some time.

Active Strategy: The energy markets are just one area within the commodities space being impacted by the conflict. But given the downstream implications, the unbalanced supply-and-demand picture will have both expected and unanticipated effects across the economy. Boston Partners’ disciplined execution of a value-oriented, research-driven investment approach – incorporating both bottom-up fundamental and quantitative analysis to identify undervalued high-quality companies, while avoiding overvalued low-quality companies – can help investors stay ahead of the changing market conditions.

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Statistics and other information taken from the following sources:

JMAT; De Beers; Wood Mackenzie; Barclays Research; Deloitte; Trade Map; Center for Strategic Research; Joint Organisations Data Initiative (JODI); and Department of Energy.

Boston Partners Global Investors, Inc. (“Boston Partners”) is an Investment Adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Registration does not imply a certain level of skill or training. Boston Partners is an indirect, wholly owned subsidiary of ORIX Corporation of Japan (“ORIX”). Boston Partners updated its firm description as of November 2018 to reflect changes in its divisional structure. Boston Partners is comprised of two divisions, Boston Partners and Weiss, Peck & Greer Partners (“WPG”).

The views expressed reflect those of Boston Partners as of February 2022. Any such views are subject to change at any time based on market and other conditions and Boston Partners disclaims any responsibility to update such views. Discussions of market returns and trends are not intended to be a forecast of future events or returns.

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Matthew Donovan

Equity Analyst

Mr. Donovan holds a B.A. in Economics from the University of Pennsylvania.

Mr. Donovan is an equity analyst with Boston Partners. Mr. Donovan is focusing his analytical efforts on Emerging Markets equities. Prior to this, he was a Research Analyst for the Boston Partners Sustainability and Engagement Team. He was responsible for original ESG/Sustainability research on companies held in Boston Partners’ portfolios. Mr. Donovan holds a B.A. in Economics from the University of Pennsylvania. He has one year of experience.

John Zhao

Equity Analyst

Mr. Zhao holds a Bachelor of Arts degree from the Richard Ivey School of Business at Western University and an MBA from Harvard Business School. He has six years of industry experience.

Mr. Zhao is an emerging markets industry analyst with Boston Partners specializing in fundamental research of stocks held in our Emerging Markets Equity products. Prior to his role at Boston Partners, Mr. Zhao worked as a Private Equity Associate in Salt Lake City and an Investment Banking Associate in Hong Kong.

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Jonah Frank

Equity Analyst

Mr. Frank was a student at Boston University where he earned a B.S. degree in business administration with a concentration in finance and management information systems.

Mr. Frank is an equity research analyst with Boston Partners. Mr. Frank is focusing his analytical efforts on equities within a variety of cyclical industries.

Edward Stansky

Equity Analyst

Mr. Stansky holds a B.S. degree in economics from Duke University and a M.B.A. from NYU’s Stern School of Business. He has six years of investment experience.

Mr. Stansky is an equity research analyst with Boston Partners and has generalist coverage responsibilities. Prior to this role, he worked as a high yield and leveraged loan analyst at DDJ Capital and as an investment banking analyst in debt advisory at BofA Merrill Lynch.

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Marlon Thompson

Equity Trading Assistant

Mr. Thompson holds a B.S. degree in finance from Boston College. He has ten years of industry experience.

Mr. Thompson is an equity trading assistant for Boston Partners. Prior to assuming this role, he worked as a portfolio operations analyst. Before joining the firm, Mr. Thompson held several roles including Vice President of Operations at Benefit Street Partners LLC and positions at International Fund Services (IFS) and Pioneer Investments.

Kara Pattipati, CFA

Relationship Manager

Ms. Pattipati holds an M.A. in International Relations from the University of St. Andrews. She holds the Chartered Financial Analyst® designation. Ms. Pattipati has ten years of industry experience.

Ms. Pattipati is a member of the Relationship Management team at Boston Partners. She works with many of our key domestic and international clients in a client service and relationship manager capacity. Prior to joining Boston Partners in 2016, she was a business development associate at Geode Capital Management.

Elizabeth Sheerin

Relationship Manager

Ms. Sheerin holds a B.S. degree in business management from Babson College. Ms. Sheerin has thirteen years of industry experience

Ms. Sheerin is a member of the Relationship Management team at Boston Partners and she joined this team in 2011.  She works with many of our key domestic and international clients in a client service and relationship manager capacity. Prior to joining our firm, she was a Client Service Representative at Putnam Investments. She also held several financial services related internships including working for Merrill Lynch Global Wealth Management and State Street Global Advisors.

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