Commodity Trading: News, Technologies and New Trends

 

The commodity industry is attracting new competitors. This is a result of the exponential growth seen over the last 10 years. Increasing demand coupled with data-driven strategies has led to companies making significant profits. This has attracted new investors, further making it a highly competitive niche.

 

Those who have been successful and are pushing new opportunities are looking for newer minimal market volatility. Regardless, there is still a lot of uncertainty when trying to maneuver the market dynamics that come with changes in the global economy. To stay ahead, businesses need to stay up to date with market trends. But what are some changes that you can expect in 2024? 

 

Contents:

- Increased demand for oil

- Data-driven trading

- Sustained market control for big payers

- Higher demand for metals

- Interconnectivity between markets

- Emerging trends

- Final thoughts

Increased demand for oil

While 2023 saw a slight decrease in value for oil-based products, it remains one of the top performers. The volatility remains constant when compared to two years ago. This has been mostly due to the impact of instability in the Middle East.

 

Despite this, the oil demand is expected to continue increasing. This means the competition will be very stiff. While many are pushing for renewable energy, the industry is showing slow growth. This will pick up speed after 2030, as a decline of oil occurs. The biggest challenge for renewable energy is the large quantities of raw materials required. 

 

Data-driven trading

Various technologies are transforming the entire landscape of commodity trading. Application of Machine Learning and Big Data tools will improve decision-making. Businesses can access markets and look at the latest news that may impact prices. These tools that use predictive analytics present a great opportunity for newcomers. As a result, many new companies are investing more in tools that will:

- Enhance trading strategies

- Provide accurate data

- Analyze past trends

 

Aside from data, tech-savvy companies are incorporating automation in all processes including the supply chain. This leads to faster and more accurate trades.

 

Sustained market control for big payers

Agriculture is a commodity market that will continue showing an upward trend. The need for food is high; this combined with the costs of processing and production has led to an increase in demand for food. The increase in production costs is due to:

- High cost of natural gas

- Reduced stocks

- Export challenges

- Labor turnover

 

This means that the top players are likely to maintain their position. New businesses that want to stay on top will have to spend a lot to keep up. It is important to consider local and regional conditions as they may influence exports of produce.

 

Higher demand for metals

Unlike agriculture and oil, the commodity market for metals decreased in 2022 and 2023. The reduced profits and high cost of processing ores push prices further down. However, that is likely to change. It is expected to be a slow and gradual growth. This is tied to the rise in technologies that require specific metals.

 

The big companies that are already participating in energy transition metals are likely to gain more control. They will have more trading opportunities. This also means minor metals such as cobalt and lithium will have a higher demand.

 

Interconnectivity between markets

When you look at the major commodities, it is easy to notice how the prices of one affect others. Consider the supply of oil or natural gas. Once there is a scarcity, the processing of agricultural products such as coffee beans goes up.

 

While attempts have been made to try to decouple the effect of one commodity on another, it is less effective on a global scale. Also, the constant changes in geopolitics favor long-term contracts as opposed to short ones. This is an effective risk management strategy that limits the impact of price changes.

 

Large companies are now branching out and investing in a variety of commodities. Interconnectivity makes it easier to predict any market changes. It also helps to reduce risks should losses occur. Major players can compare between two areas and identify which has better opportunities. It provides more flexibility to maneuver the volatility that can occur due to economic factors.

 

Emerging trends

The energy shift is a key trend, with increased demand for metals and minerals required for sustainable energy technology. This covers materials for electric car batteries and renewable energy infrastructure. As demand rises, new geopolitical forces may emerge, changing the dynamics of global commodities commerce.  Markets are becoming increasingly integrated, with commodities associated with energy transition according to McKinsey&Company.

 

Because commodities markets are inherently volatile, effective risk management is still critical. So traders are using advanced analytics and real-time data to manage price changes and reduce risk. Integrating new technology improves market forecasting and decision-making.

 

Final thoughts

Commodities remain a lucrative investment. With prices still changing, businesses need to adopt some of the latest tools that promote data analytics and automation. Investors need to be aware of the volatility of markets as political and regional conditions change.

 

Take into consideration the demand for various products. Those who are into agriculture should consider the costs of production going up. Different niches have become increasingly connected. As the price for oil and oil-based products goes up, so will the cost of producing other commodities including food. New technologies can help forecast new prices allowing investors to plan and create better strategies.

You can get your Real-Time and Historical Forex Data with a free Fx Data API key.

Build with us today!

Start Free Trial