After stabilizing for several years, the commodity trading industry is confronting a new, less profitable reality. The industry’s gross margins in 2016 dipped six percent to $41 billion, our research shows.
This decline is setting off a torrent of deal-making and speculation that is transforming the face of commodity trading. From oil to agriculture, building scale is proving to be the key competitive advantage for the future. The largest trading companies – both diversified firms and those concentrating on a single commodity – use their financial strength to dominate the industry’s largest, most profitable trades and invest in cutting-edge technology.
As these traders solidify their lead, the gap between those players with a critical mass in one or more commodities and the rest of the pack is widening. Within a few years, the industry will have a different profile – one that is even more dominated by the biggest players.
The Endgame for Commodity Traders is the sixth of a series of pieces of research produced by Oliver Wyman which analyzes the changing dynamics that are redefining the commodity trading industry. Our library of research is more relevant than ever not only for commodity industry leaders interested in getting ahead but also for any company that relies on commodities to produce its products.