Commodity traders are facing a wave of new challenges as political and economic risks rise across the globe. Issues like military conflicts, changing tariffs, and supply chain troubles are shaking up how goods move worldwide. A recent report by Willis, part of WTW, looks at these risks and what they mean for the trading world.
One of the biggest problems traders face right now is tariffs. New trade restrictions are making it harder to stick to usual routes and causing a lot of uncertainty for business decisions. China, the world’s largest buyer of commodities, is also causing concern. Its slower economic growth and other financial stresses could hurt traders who rely heavily on the Chinese market.
Climate change is starting to impact trading too. It affects demand for energy depending on the season and brings challenges like increased pesticide use and problems with moving goods via rivers. Political tensions, especially the ongoing conflict in Ukraine, are making markets unstable. There’s a real worry about possible disruptions in the Black Sea, along with the chance that Russia might escalate the conflict.
Shipping is getting riskier as well. Attacks by drones and other tricky military actions are making key shipping lanes unsafe. This is pushing up transport costs as ships have to take longer routes, putting the flow of global commodities at risk.
The report also highlights some risks that could get worse soon. New European rules on sustainability could change how markets work worldwide. Plus, there’s worry about the international bond market as central banks pull back the financial support they gave after the pandemic. While these issues haven’t caused major problems yet, experts are watching closely.
Evan Freely, who leads Willis’ credit risk team, said that good risk management is more important than ever. He pointed out that many countries are trying to produce goods closer to home. But trade is still crucial, especially for commodities that are hard to make in most places. Strong risk controls can help avoid shortages and keep supply chains steady.
Freely adds that the findings from the report offer useful insights for anyone involved in commodity trading. He thanked the experts who shared their first-hand knowledge to help shine a light on what’s happening now.
As the world faces these growing risks, commodity traders will need to stay alert and make careful choices to keep goods moving and markets stable.