For a long time, disruption in commodity markets tended to arrive in ways businesses could absorb, even if the impact was significant. Events such as wars, sanctions or tariff changes created pressure, but there was usually enough time to assess the situation, gather information across the organisation and decide what to do next before conditions moved again.
That assumption has become harder to rely on. The past few years have seen multiple shocks land in quick succession, with the effects of the pandemic, the war in Ukraine, tariff changes that can reverse quickly and renewed instability in the Gulf all feeding into one another rather than settling.
Instead of dealing with one event at a time, firms are now operating with a layer of uncertainty that sits across pricing, supply and decision-making.
From where we sit at Quoreka, working with companies managing physical trading and risk, the issue is less about where markets move next, and more about how quickly firms can understand their exposure when something changes. We are not in the business of forecasting price direction, but we do see what happens when information takes too long to surface or when systems are not set up to keep pace.
In many parts of the commodities sector, processes still reflect a slower operating environment. Contracts take time to negotiate and execute, hedging is often managed on a daily cycle, and key data points sit across different teams before they are pulled together.
Harry Knott
That was workable when markets allowed for a degree of delay. It becomes a problem when things move quickly.
When a geopolitical development breaks, the immediate questions are familiar enough: What are we exposed to? How much material is tied to a particular region or route? And what does that mean for current positions?
The difficulty is not the questions themselves, but how long it takes to answer them.
Most organizations can piece that view together – it just doesn’t always happen fast enough to be useful. By the time the position is clear, the market may already have moved, leaving firms to deal with both the initial disruption and whatever it triggers elsewhere in the book.
The interaction between physical supply and hedging is where this shows up most clearly.
If a shipment is delayed or cannot be fulfilled, the hedge linked to it does not disappear, and the business is left managing a position that was supposed to reduce risk. That then needs to be unwound or adjusted, often in less stable market conditions, and without a clear view it is easy to end up reacting late.
What stands out is that the firms coping best are not necessarily the ones with a stronger view on direction, but the ones that can see their position quickly and act on it. In markets such as aluminium and other industrial metals, where regional pricing differences and supply concerns have become more pronounced, that ability is starting to look less like an advantage and more like a requirement.
Before supply is materially disrupted, behavior has already started to change. Firms are rethinking sourcing, contract length and hedge timing because there is less confidence that current conditions will hold long enough to support earlier decisions.
In theory, sourcing more locally or diversifying supply reduces exposure. In practice, that is often constrained by the nature of the materials involved.
Many businesses rely on specialized inputs or long-standing supplier relationships that cannot be replaced quickly, particularly where technical specifications or production processes have developed over years.
The same applies to contracting and investment decisions. Longer-term commitments are harder to justify when policy and market conditions can change with little notice. Even when a specific issue settles, the experience of recent volatility tends to carry through into the next decision.
That lingering uncertainty has a wider effect – it slows investment, narrows risk appetite and puts more pressure on areas that can be controlled internally, especially where existing systems are not providing a clear or timely picture of exposure.
For most commodity businesses, uncertainty is not going away anytime soon. Trying to predict each development is of limited use. If a leadership team asks how much exposure sits in a particular region, route or near-term price movement, that answer needs to be there straight away. What matters is whether the business can see its position clearly enough, and quickly enough, to respond when something changes.
Harry Knott is senior business architect at Quoreka, a provider of energy and commodity trading risk management (E/CTRM) solutions.