The world's leading commodities trading houses such as Glencore, Cargill, Vitol, Trafigura and Mitsubishi, which represent a "vital nexus between producers and consumers of raw materials" have earned $250 billion over the past decade, surpassing the likes of JP Morgan Chase, Goldman Sachs and Morgan Stanley, according to a comprehensive industry account conducted by the Financial Times.
The commodities 'supercycle' that began in 2000 in response to rapid Asian economic expansion has entered a period of slowing spin as prices of commodities ranging from oil to copper to gold face increasingly strong headwinds.
The most striking decline so far has been in the gold market. Bullion suffered a catastrophic Friday, crashing almost $80 and well below the important psychological barrier of $1,500/oz.
Even if strong Asian demand continues, the commodities market has become markedly more competitive. "The industry will not see the massive return on equity it enjoyed in the past," according to Torbjörn Törnqvist, CEO of Gunvor.
Commodities traders spoiled by investment returns of 50-60% in the mid-2000s are now seeing averages closer to 25%.
Sources: Javier Blas writing for the Financial Times; Bloomberg