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Gas, power and LNG are set to eclipse oil as the biggest driver of commodity trading profits, according to research from McKinsey & Co Inc.
“In the last two years they’ve been almost parallel and we definitely see stronger fundamental growth prospects on the power, gas and LNG side going forward,” said Roland Rechtsteiner, head of McKinsey’s commodity trading and risk practice.
Still, overall industry profits fell by about 30% in 2024, with earnings before interest and taxes totaling and estimated $72 billion in 2024, down from a record $104 billion a year earlier.
Commodity trading houses have enjoyed the most profitable period in their history recently, as first the Covid-19 pandemic and then Russia’s invasion of Ukraine upended supply chains, spurring shortages and huge price volatility.
While profits have eased off from record levels, they’re still far higher than before 2020. Last year, Geneva-headquartered Mercuria Energy Group made over $2 billion in profits compared with just under $600 million in 2019.
McKinsey projects industry earnings could grow incrementally to as much as $115 billion by 2030 due to market growth and the build-out of new trading desks at commodity producing and consuming companies.
“We see that the new normal is for the trading value pool to be really twice as big as what we had before 2020, that’s driven by a lot of structural changes in the power, oil and gas markets as well as geopolitics,” said Rechtsteiner.
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