The commodities industry has experienced an intense period of growth on the back of rapid economic growth of emerging countries, particularly China. The industrialization and urbanization of the so-called BRICS countries (Brazil, Russia, India, China and South Africa) propelled demand and prices for raw materials as diverse as crude oil and soyabean. But after a decade of torrid economic growth, there are signs that emerging markets are slowing down. Above all, China’s GDP has fallen back from annual rates above 10 per cent to a new level of around 7 per cent.
Energy, metals and agricultural commodities prices have settled at a high price plateau. Commodities producers, sandwiched between weaker prices and rising costs, are slashing projects, potentially sowing the seeds of the next big price rally.
The commodities industry is preparing new strategies for turbulent times. But turbulence does not mean failure. On the contrary, turbulent times will create new opportunities; new trading strategies will appear and new markets come into sight.
The economic slowdown is not the only turbulence – the energy sector is weathering a turbulent period as the US shale revolution redraws the world’s oil and gas map. The boom in North American production has shaken up trade routes, potentially changing geopolitical assumptions and is forcing energy companies to alter their business plans.
Turbulent times in banking, commodities and trading will sharpen the focus of financing both trade and investment. Although often overshadowed, the financing function of the trading houses will become even more important in years to come.
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