The world market for raw materials has doubled in price
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The total value of global commodity trade has grown from $27 billion in 2018 to $52 billion in 2021, almost doubling in three years, according to a McKinsey & Company report. This growth was largely due to oil trade, which increased in volume over this period by 90% to $18 billion due to rising prices. Revenues in electricity and gas trade grew somewhat more slowly: from $7 billion in 2018 to $13 billion in 2021 year. McKinsey expects commodity prices to rise even after the final 2022 results are in.
In the past two years, commodities trading has experienced powerful fluctuations caused by the consequences of COVID-19 and geopolitical events related, among other things, to the Russian military operation in Ukraine. US natural gas price volatility jumped from a low of 25% in the third quarter of 2021 to 179% in March 2022, while European gas prices rose from less than €10 per MWh measuring its cost) in the second quarter of 2020 to more than €330 per 1 MWh in the second quarter of 2022.
McKinsey recalls that due to the consequences of the conflict in Ukraine, tariffs for the transportation of raw materials have increased markedly: compared to the level of the first quarter of 2021, the Baltic Dirty index (measures the change in the cost of delivering goods, in particular coal and steel) increased by 288%, the Baltic Clean Tanker index (the cost of transportation of petroleum products) – by 195%, tariffs for the transportation of liquefied natural gas jumped by 266%.
Other commodities trading trends that analysts have seen include an increase in trade finance and working capital needs, as well as an increase in overall liquidity in commodities markets. Liquidity has also risen as major manufacturers shifted from direct-to-consumer sales to commodities trading to capitalize on their global logistics, accounting and inventory management systems. For their part, some large buyers are abandoning long-term contracts in favor of the spot market. Many commodities players have also expanded their involvement in related areas, such as energy sellers entering the value chains of agricultural traders.
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