The commodity trading sector achieved a milestone with profits soaring to an unprecedented $104 billion last year, according to a McKinsey report. This record-setting figure surpasses the previous high of $99 billion in 2022, a year significantly influenced by the Ukraine conflict's impact on the market. The influx of new participants, including technology-oriented traders and hedge funds, alongside increased earnings from power trading, played a pivotal role in this unexpected rise.
Earnings before interest and tax across the industry witnessed a dramatic climb, doubling from $52 billion in 2021 to the current $104 billion. This comprehensive figure encapsulates the profits from diverse entities within the sector, ranging from independent traders to major corporations like BP and Shell.
A notable 47% year-on-year increase in profits from power and gas trading underscores the growing importance of these commodities. The emergence of lower-carbon energy products, such as hydrogen and biofuels, is creating novel trading opportunities by linking various commodities essential for production and transport.
Despite the burgeoning areas of growth, oil trading remains a dominant force, contributing the largest share to the sector's overall earnings, even though its profits dipped by 19% from the previous year.
The shift towards data-driven trading models has been a significant factor in this profit surge. An overwhelming 87% of European companies utilizing data-driven strategies reported earnings exceeding Euro 100 million EBIT in 2022, a stark contrast to the pre-2019 scenario. The embrace of AI and generative AI technologies is poised to redefine industry leadership in the coming years, with a noticeable investment from banks, hedge funds, and utilities to adapt to market evolutions, particularly in the volatile power and gas segments.
The rapid ascendancy of data-driven entities, capturing nearly a quarter of the value pool in power and gas, illustrates the transformative impact of technological integration in commodity trading.
