McKinsey – The critical role of commodity trading in times of uncertainty

The commodity trading industry is facing significant levels of uncertainty, with over $100 billion EBIT generated in 2023. Success will rely on the ability to manage unpredictable market circumstances. The industry has seen new entrants, such as tech-focused trading players and hedge funds, creating a need for additional risk management offerings. Vibrant markets can increase value pools and help facilitate the energy transition. Two trends shaping the industry are increasingly interconnected markets and the growing importance of power. Portfolio optimization and data-driven trading models can help players keep pace with shifting markets. Despite decreasing market prices, commodity markets remain tight, with changes in demand and supply harder to predict. Geopolitical events and supply chain disruptions have impacted global trade activity, while economic performance in specific countries can affect commodity prices worldwide.