BHP Flags 'Spillover Effect' Of Commodities Surge As Nickel Price Doubles

Mining group BHP warned on Tuesday of the impact of surging commodity prices on already skyrocketing inflation following Russia's invasion of Ukraine, while nickel trading was suspended in London after prices more than doubled.

Oil, metal and other commodities prices have soared as fighting in Ukraine has intensified. Oil rose past $126 a barrel on Tuesday, while the London Metal Exchange halted nickel trading after prices of the stainless steel ingredient surged above $100,000 per tonne.

"We have seen hundreds of percentage increases of prices on a range of commodities," BHP Group Chief Executive Mike Henry said at a conference in Sydney. "That is going to have a spillover economic effect on inflation, potentially on global growth."

Consumer brands such as Starbucks, Burger King parent Restaurant Brands International Inc, McDonald's Corp and Woolworths have all flagged rising cost pressures this year.

Inflation has been running at a 40-year high in the United States and hit record highs in the euro zone.

Speaking at the same conference as Henry, Morgan Stanley Chairman and CEO James Gorman urged the U.S. central bank to be cautious about raising interest rates following the invasion, though he said failing to lift them enough was also a threat.

"The Fed has a real dilemma now," he said. "Unambiguously inflation is on the rise and it is not transient." The outbreak of war meant "the problem just got bigger, not smaller. My bidding is the Fed will raise very methodically now. No surprises up or down."

"The worst thing that can happen is the war recedes ... but inflation's raging (because) the Fed didn't do enough."

The U.S. central bank is widely expected to raise its benchmark overnight interest rate by a quarter of a percentage point on March 16. Fed Chair Jerome Powell said last week it will act cautiously given the uncertainty over the impact of the war.

"They're in this delicate balance between having to be very considered and taking action to reduce inflation," said Macquarie CEO Shemara Wikramanayake.

LATEST BRANDS

Dozens of companies have shut down activity in Russia since its invasion of Ukraine, which Moscow calls a "special military operation".

German sportswear maker Adidas and Calvin Klein and Tommy Hilfiger owner PVH Corp are among the latest brands to announce the suspension of activities in Russia.

Estee Lauder has also said it will suspend all commercial operations in Russia, while Procter & Gamble Co is ending all new capital investments and "significantly reducing" its portfolio there.

The conflict has roiled global stock markets as investors have worried about the economic fallout, putting in doubt market listings. Malaysia's Top Glove Corp Bhd postponed a plan to raise $347 million in a Hong Kong listing due to market uncertainty.

Chinese fast fashion retailer Shein had already postponed its U.S. listing ambitions due to the upheaval, and a plan by India's LIC to raise $8 billion before March-end is also in doubt.

Credit rating firm Fitch on Monday joined rival Moody's in suspending its commercial operations in Russia.

JPMorgan, which runs the most widely used emerging bond market indexes, also said it would exclude the country from all of its fixed income indexes, in common with rival index providers FTSE Russell and MSCI.

German utility Uniper said it would write down financial exposure to the suspended Nord Stream 2 pipeline project, joining pipeline co-funders Wintershall Dea, Shell and OMV.