Commodity trading could soon be dominated by a “privileged few” companies with sufficient access to capital and physical flows to cope with intense volatility, McKinsey has said.
The consultancy company said in a March 3 report that commodity trading has moved into a “new normal”, with overall value pools twice as large than during the pre-Covid period, but increasingly influenced by changing government priorities and geopolitical uncertainty.
Though large traders capitalised on price volatility and supply fears following Russia’s invasion of Ukraine in 2022, generating record returns, McKinsey said that market uncertainty during 2025 “made capturing value from volatility with traditional models difficult”.
The report calculated that price volatility has remained relatively consistent, dropping just 4% last year compared to 2024.
However, it estimated that the potential for traders to monetise that volatility – in other words, a measure of the predictability of volatility – fell by 14%.
The findings echo a report published late last year by consultancy Oliver Wyman, which found the unpredictability of price swings has increased markedly, leaving the sector facing a “new kind of instability”.
McKinsey said there are several drivers for this trend, including trade fragmentation, extreme climate events and the energy transition.
At the same time, governments are prioritising supply security of core commodities over “purely market-based logic”, said authors Fransje van der Marel and Roland Rechtsteiner.
As a result, commodity players with strong access to liquidity, control over physical flows and improved sophistication are likely to outperform the rest of the market. The report said this group could include trading houses, financial institutions, US-based oil majors and upstream entities.
“Commodity trading is at an inflection point,” the report said. “In just a few years, industry leaders could be made up of just a few powerful global trading systems, what we call the ‘privileged few’.”
Large traders have benefited from strong financial support in recent years, upscaling revolving credit facilities as well as expanding into export credit agency-backed deals.
However, in many markets, smaller traders have found financing harder to come by as banks focus efforts on the larger end of the market – a trend dubbed the ‘flight to quality’.
The McKinsey report said larger traders’ strong access to finance “essentially creates a virtuous cycle of increased returns, which can then be reinvested”.
For example, traders are increasingly looking to deploy their own capital through prepayment deals with upstream operators, with offtake agreements for strategic goods such as critical minerals.
“Naturally, the increasing control of physical flows and asset intensity, as well as trading scale, could lead to more concentration” among larger players, the report said.
