McKinsey: Commodity Markets Brace for Dynamic 2030 Outlook
Commodity trading is witnessing a significant shakeup, recalibrating its strategies after after years of strong profits.
Traders across the globe are adjusting to shifting circumstances that have seen a temporary dip in the earnings before interest and tax (EBIT) but with promising projections for the coming years.
According to McKinsey, commodity trading faced a steep reduction in EBIT value pools during 2024, dropping by more than 30% compared to the previous year. This follows an era of exceptional profitability that started in 2018.
Yet, not all is bleak on the finance front, with EBIT expected to reach a staggering US$115bn by 2030, climbing annually by 10% — more than double the past decade's average growth rate.
Shifts within energy supply chains
In 2024 alone, the oil industry experienced a 40% reduction in EBIT.
Increasing refining capacities and a slackening demand in mega markets such as the US and Europe have impacted trading margins.
With closures of older refineries and the rise of new refining centres in the Middle East and Africa, the industry's landscape is being shaken up.
The transformation isn't limited to oil. Liquefied natural gas (LNG) faced its challenges with a 23% decline in EBIT, partly due to delays in enhancing US export capacities.
However, LNG continues to play a pivotal role in the energy transition narrative, with an expected uptick in demand over the next decade.
While European gas costs have fallen from their peaks in 2022, they still hover around 50% higher than figures from 2021 due to ongoing supply chain and geopolitical tensions.
The shifting supply dynamics aren't confined to oil and gas.
Europe's thriving corporate demand for renewable energy sources propelled power purchase agreements (PPAs) to a new high of 21 gigawatts (GW) in 2024, showcasing a solid commitment towards a greener future.
Similarly, in the United States, the increasing needs of data centres are foreseen to boost power demand by 15% annually through 2030.
Reshaping agricultural and metals markets
The agricultural sector, just like its energy counterpart, felt the sting of reduction with a near 25% fall in EBIT.
Crop prices which peaked between 2020 and 2023 are finally stabilising, allowing for some recovery in trade dynamics.
However, the unceasing shifts in weather patterns and geopolitical climates continue to challenge global food supply networks.
In contrast, metals and mining sectors witnessed an uplift.
A 20% increase in margins highlighted a year of recovery, bolstered by the rising demands for battery metals essential for energy transition technologies.
As such, commodities like lithium, nickel and cobalt are seeing enlarged trading windows, with new extraction sites opening up in Africa and South America, reducing reliance on Chinese processing channels.
Future outlook for commodity trading
In the face of the disruptions experienced in 2024, the trading world is moving swiftly, leveraging data analytics and adjusting to market liberalisation.
These changes pave the way for opportunities in trading energies like gas and power, aligning with broader electrification and sustainability goals.
Looking forward, the landscape for oil and gas will continue to evolve, transitioning from traditional markets in the OECD regions to burgeoning economies across Asia, the Middle East and Latin America. Such a pivot necessitates not only investment in adaptable infrastructure but also a broader reach into new geographical territories.
The surge in renewable energies, alongside the complexity introduced by decentralised energy systems and battery storage, heralds a new era in commodity trading — one where agility, foresight and strategic adaptability will chart the path to enduring success.
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