The global commodity trading industry celebrated its second-best year ever in terms of profits, amassing over $100 billion in earnings and accumulating substantial cash reserves for investment in assets and expansion into new markets, Bloomberg reported on Monday.
Despite a slight decline from the record-breaking year of 2022, profits remained significantly higher than previous peaks, such as those observed in 2008-2009, as per analysis by consultancy firm Oliver Wyman LLC.
Adam Perkins, a consultant, noted in an interview that the industry experienced robust margins overall, primarily due to ongoing tightness in supply and demand dynamics. Although specific financial results for many industry players are not yet public, reports indicate that major independent trading houses are anticipated to record an average profit decrease of over 30 per cent compared to the peak levels of 2022.
However, challenges such as disruptions in diesel and fuel oil supply, alongside sustained high margins in gas and power trading, counterbalanced the reduced volatility in crude oil due to Russian-related issues.
This situation leaves the firms engaged in purchasing, storing, and transporting global resources with substantial financial reserves, positioning them as key providers of energy, metals, and food during the West’s gradual shift away from fossil fuels.
These trading entities have capitalised on their financial strength by acquiring oil refineries, storage facilities, power plants, and even other trading firms, supported by significant backing from countries like Italy, Germany, the US, and Saudi Arabia. As a result, they are assuming a more prominent role in ensuring the steady supply of essential commodities such as gas and copper.
Moreover, the industry’s executives, primarily shareholders or partners in these predominantly private companies, have reaped considerable wealth through share buybacks and dividend payouts, contributing to a transition in leadership as veteran traders retire and pass the baton to a new generation.
Perkins acknowledged both the opportunities and challenges facing incoming leadership, emphasising the heightened scrutiny and the imperative to maintain the industry’s legacy.
