The world commodities 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 of global events.
Whether amidst a pandemic, war, recession, or rapid technological evolution, some commodity firms have found themselves weathering the storm of global events more successfully than those in other sectors.
‘Why?’, you might ask.
What it boils down to, primarily, is a company’s experience and ability to handle the innate fluctuations of this ever-changing industry.
While the long-term impact of COVID-19 on the national and global economy has yet to be revealed, we can gauge a clear pattern of challenges and opportunities that other global happenings have created.
Let’s look at how the world commodity market, its firms, and professionals have been impacted by significant global events.
Impact of global events on the world commodities market explained
Mobilisation and supply chain issues
During the recent pandemic, lockdown conditions had a significant impact on the mobilisation of both people and parts throughout the world commodity market. This looked like:
- Closed borders, restricted visa supplies, and asking of people to stay at home.
- Global commodity supply chain market disruption
- Interruption of commodity trading and shipping activities
- Decreased freight capacities
- Increased rates, speed of processing, and delivery times
Despite the immense difficulty in keeping freight moving, the world commodity market was under huge pressure to keep supply chains in check and ensure countries had stocks of their required goods. Even so, many regions found themselves lacking access to essential medical supplies, foodstuffs, and everyday items.
Bearing all of this in mind, it comes as no great surprise to learn that 72% of businesses report having been negatively impacted by COVID-19.
What affects the price of commodities? A litany of factors, from international relations to economic recessions.
Let’s look at a few examples:
The energy industry – in particular, oil trading companies – had a disastrous start to 2020. The oil price war between the USA, Saudi Arabia and Russia saw barrel prices fall below zero in the United States as sellers were forced to pay customers to take unwanted oil.
The war in Ukraine has forced food and fuel prices to unprecedented highs, creating a knock-on effect for supply chains throughout the world commodity market.
The current economic slowdown is negatively impacting industrial commodities such as copper and zinc, though it’s not all bad news:
Gold prices have risen because of buyers seeking safety in the turbulent financial market. And what is Switzerland’s most famous commodity? You guessed it—gold. It’s currently the world’s leading exporter, and firms with a stake in the gold trade are especially well-positioned to profit from the latest price changes in the world commodities market.
Other firms that appear to be weathering this storm most successfully are those which have sufficient cash flow to enable them to buy gas and oil when the market is down—as well as the means to stock it.
Oil trading companies are coming out on top of this market turbulence, taking opportunities to profit from price movements. Accustomed to volatility and risk-taking, these trading firms are no strangers to uncertain times and often derive huge profits from challenges in the commodities market.
Where ongoing strikes, widespread illness, and lockdowns are concerned, staff shortages can prove to be one of the greatest struggles that the commodities market comes up against.
Within the world commodity market, it’s firms with assets, refineries, and mines that are generally perceived to be among the most stable in these climates. Some of the quickest firms to resume work after the COVID-19 lockdowns were European refineries which were able to pivot their activities according to market changes.
Resilient Swiss companies have realigned their post-pandemic talent acquisition strategies to better serve the market changes since COVID-19.
As well as stable pockets of the industry, we’ve also seen some professions experience more stability than others. At Swisslinx, we’ve seen an uplift in the number of roles relating to risk and compliance, legal functions, and trade finance.
Rapid technological evolution
New technologies have been making waves within the commodities and natural resources sector for years, and their effect is now more heightened than ever.
We’ve seen calls for increased digitisation of the commodities market to counteract fraud, 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 (DTL) products for commodity trade finance, with DTLs featuring amongst the top emerging technologies in Switzerland today.
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 all around the EMEA region.
Whether you’re an industry professional considering your next career step 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.