Trader Profits – Driving Increased Expenditures on Technology?
It’s no secret that commodity traders have had back-to-back record years in terms of profits. According to Oliver Wyman, profits likely exceeded $100 billion in 2022, enabling commodity traders to take a longer term investment perspective and increasing their importance in global markets. “Commodity traders are working more closely with governments to ensure security of energy supply and support new green value chains. By doing so, the job of a trader transitions from a market broker to an investor reshaping supply chains. Yet, while government incentives and the impact of sanctions create opportunities for commodity traders, the changes also impose expectations of new standards of scrutiny,” says the Oliver Wyman report. `it goes on to suggest that with new leadership and ample cash reserves, commodity traders are set to evolve into drivers of change in the industry suggesting that to capitalize fully, they need to proritize three areas as follows:-
- “Strategic asset positions across legacy and emerging value chains
- Widening risk management and steering at the desk and portfolio levels
- A collaborative, tech-enabled trading platform”
One area that commodity traders are investing in seems to be refining. According to a recent article by Bloomberg, cash-rich commodity traders are buying the oil refineries that oil majors are increasingly turning their backs on. “Owning those assets offers a chance to have more options when making trades, greater exposure to physical and paper markets and better insight into fuel supplies. The sites are coming up for sale as Big Oil faces shareholder pressure to trim portfolios to focus on assets with the best returns, while also offloading or cleaning up major polluting businesses like refineries.” Indeed, as the article goes on to say, owning these assets provide many potential benefits to the traders and allow big oil to extricate itself from supposedly ‘dirty‘ assets.
However, as our forthcoming market sizing update will demonstrate, this is also resulting in a miniboom for CTRM and related software with oil and refining being one of the strong areas of growth likely on the back of not just this transition in ownership but also in terms of geopolitical trends around Russia, China and the BRICS in oil and pertrochemicals in places like Dubai and Singapore. We also see strength in the ags and softs side of the industry for CTRM and CM software solutions and expenditures too. All forms of risk software are another potential boom area along with data management. In fact, the only place where we see a bit of a retreat is in US power and gas where a combination of need to upgrade the grid and build out renewable assets is taking place against a backdrop of increasing credit issues. Here, we see a small slowdown in activity when it comes to CTRM and related software sales.
The updated market sizing report should be available for purchase by the end of summer.
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