The global commodities and natural resources market has had its fair share of highs and lows of late, and like many industries it has not been spared from the damaging impact Covid-19 has had. However, some commodity firms have found themselves weathering the pandemic storm more successfully than those in other sectors, thanks to their experience in handling fluctuations that are so common within this ever-changing industry.
While the full impact of Covid-19 on the national and global economy has yet to be revealed, we can already see some clear challenges and opportunities for firms and professionals in this space. Here’s how Covid-19 has impacted the commodities market.
Mobilisation and supply chain issues
Lockdown conditions all over the world have had a significant impact on the mobilisation of both people and parts over the past months. With many countries imposing strict measures to control the spread of coronavirus – including closing borders, restricting visa supplies and asking people to stay at home – the global commodity supply chain has been significantly impacted. Commodity trading and shipping activity has been impacted, with flow-on effects to freight capacities, rates, speed of processing and delivery time. According to Swissinfo, restrictions have seen activity decreased at ports, although cargo has still been flowing to and from most destinations, albeit at a delayed rate.
This is partly due to increased pressure to keep supply chains moving in order to ensure countries have stocks of their required goods. This even extends to Swiss coffee and cocoa reserves – Swiss commodity trading companies have been working with roasters and chocolate makers to ensure federal reserves are maintained.
Some firms more stable than others
The energy industry – and in particular oil trading companies – already had a rocky start to 2020. The oil price war between USA, Saudi Arabia and Russia saw barrel prices sink to a 17-year low in March, and oil prices even fell below zero in the United States as sellers were forced to pay customers to take unwanted oil. The price war combined with Covid-19 presented enormous challenges for natural resources markets all over the world. Energy prices are expected to be 40% lower than in 2019, according to the World Bank, with the economic slowdown also impacting industrial commodities such as copper and zinc. Interestingly, gold prices have risen as a result of buyers seeking safety in the turbulent financial market.
The firms that are weathering this storm the most successfully are those which have sufficient cashflow to enable them to buy gas and oil when the market is down, as well as having the means to stock it. We’re seeing oil trading companies at the forefront of this market turbulence, taking opportunities to profit from price movements. Accustomed to volatility and risk taking, these trading firms are no stranger to uncertain times and may well come through this crisis on top.
Firms with assets, refineries and mines are generally perceived to be more stable in the current market than the classic trading shops. Indeed, some European refineries have resumed work after the coronavirus lockdown, adapting their activities according to market changes. This is a positive signal for the industry and jobseekers alike. Meanwhile, Sberbank has just announced a physical commodities trading company in Switzerland, suggesting some firms are faring better than others.
As well as stable pockets of the industry, we’ve also seen some jobs experience more stability than others. At Swisslinx, we’ve seen an uplift in the number of risk and compliance roles within the commodities sector, as well as legal functions and trade finance.
Technology pushes forward
New technologies have been creating innovation within the commodities and natural resources sector for years, and their importance is perhaps now more heightened than ever. We’ve seen calls for increased digitisation of the commodities market to counteract fraud that has blighted the market recently, with suggestions of a digital platform to track the entire logistics lifecycle of transactions. Blockchain technology can help to achieve this, thanks to its focus on privacy preservation. We’ve observed the market move to adopt distributed ledger technology products for commodity trade finance, something innovative Swiss firms have been at the forefront of.
Make your next move in commodities and natural resources at Swisslinx
At Swisslinx, we have a wealth of knowledge on the global commodities market, with clients across up-mid and downstream organisations across EMEA.
Whether you’re an industry professional considering your next career step after Covid-19 or an organisation looking to secure the market’s top talent, we’d love to hear from you. Find out more about our commodities and natural resources function or read more about our client services.