The Financial Times Commodities Global Summit 2023 last week brought together some of the most influential individuals in the commodities industry to discuss the current and future states of the industry. The conference featured several keynote speeches, panels, and discussions, which explored topics such as geopolitics, shipping, ESG investing, pricing, mining, tracking supply chain emissions, and the energy transition.
The path to net zero
One of the main themes that emerged from the Summit was the impact of climate change on the commodities industry. Some of the world’s largest commodity companies including BHP, Glencore, and Rio Tinto discussed their commitments to achieve net-zero greenhouse gas emissions by 2050 or sooner. This was seen as a significant step towards combating climate change and reducing the industry’s carbon footprint.
“It is clear that the largest commodity companies are making huge efforts to create solid decarbonization strategies for Scope 1, 2, & 3 emissions,” said Alessandro Esposito, Senior Sales Executive, Nautilus Labs. “Scope 3 has become increasingly important from a maritime and transport perspective thanks to the strict regulations and targets the IMO has introduced. More efficient ships are being designed and will be introduced to the market over the coming years, but optimization and efficiency technologies play a huge factor in reducing existing vessel emissions today.”
However, the Summit highlighted that despite the industry’s efforts to reduce emissions, coal remains a significant source of revenue for many commodity companies. Glencore, one of the largest coal exporters in the world, is set to lose its crown as the top thermal coal exporter to rival company BHP. This shift reflects the changing landscape of the industry as companies begin to transition towards cleaner sources of energy.
Experts spoke about the existence of various carbon markets – with a currently fragmented framework across countries, regions, and sectors. The panelists emphasized that the baseline of ratings should start with “minimum” with premiums being laid out if targets above the minimum are met.
Geopolitical risks and challenges
The Summit also addressed the geopolitical risks and challenges facing the industry. Tensions between Ukraine and Russia have had a significant impact on global commodity prices, particularly in the energy sector. The Summit discussed the need for the industry to be proactive in mitigating geopolitical risks and diversifying supply chains to reduce reliance on any one region or country. Discussion centered on the need for security, which has shifted global trade patterns. The panelists agreed that economies can adjust to sanctions, but they also highlighted the importance of not overdependence on a single supplier.
Taylor March, Director, Sales, Nautilus Labs penned an article discussing the increasing demand for copper in a decarbonized future and how China’s investments in overseas extraction, refining, and renewals could threaten the US’s transition to clean energy, and mulls over whether the increasing demand for copper in China reduce the tonnage needed between China and the US in an already tough container market.
Alternative fuels
The panel on the Golden Age of Gas expressed a positive outlook for gas, with LNG being key for Europe. Trafigura also discussed the future of LNG as a transition fuel, stating that there is currently no alternative. The panel pointed out that the USA and Qatar are strong, large suppliers of gas, with Australia being a smaller one, followed by some other countries.
Trafigura’s CEO, Jeremy Weir, highlighted the impact of the banking crisis on the commodities market, emphasizing the importance of not overdependence on a single partner. He also stressed the need for a more even distribution of resources.
“The decision of vessel owners to select fuels for their next-generation vessels is shrouded with ambiguity regarding future supply,” adds Jan Wilhelmsson, Chief Digital Officer & Managing Director, UK, Nautilus Labs. “As a result, uncomfortable assumptions regarding future trading patterns are inevitable. Furthermore, the forecasted scarcity of future fuels and their high prices accentuate the importance of operational efficiency, making it a key factor for both older tonnage and carbon-neutral fuel operations alike.”
The role of technology
Another topic that was discussed at the Summit was the role of technology in the commodities industry. The discussions highlighted how technology is transforming the way commodity trading houses operate, from automating processes to improving supply chain visibility. The use of blockchain technology in commodity trading was also discussed as a potential solution to increase transparency and reduce fraud in the industry.
Vanessa Roettger, Strategic Marketing, Nautilus Labs, remarked: “The need for decarbonization in the commodities industry to combat climate change is obvious. Major players are committing to net zero targets and investing heavily in renewable energy sources. However, there are still significant challenges to overcome, including the high costs of transitioning to decarbonized operations, the need for greater collaboration and transparency across the industry, and better, more standardized data.”
Emissions tracking and the role of data
The panel on tracking supply chain emissions discussed the importance of transparency and data quality in carbon accounting. The panelists acknowledged the difficulty in comparing data, as companies use different methodologies.
This year’s Financial Times Commodities Global Summit 2023 was a key platform for industry leaders to discuss the current state and future of the commodities industry. It highlighted the importance of combating climate change, embracing technology, and managing geopolitical risks in order to ensure the long-term sustainability of the industry. The implications of the Summit’s findings are clear: the commodities industry must embrace sustainable practices, technology, and global collaboration to ensure its long-term sustainability.
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