It is estimated that the commodity industry made a staggering $105 billion in 2023, highlighting the issue of market supply and demand tension.

After five years of record profit growth, the commodity trading industry has accumulated a cash reserve of up to $120 billion, allowing large traders to use this fund for reinvestment to consolidate their dominant position.

A study by consulting firm Oliver Wyman estimates that the cash reserves of the commodity trading industry range from $70 billion to $120 billion, due to significant profit growth in almost all areas of the industry.

Oliver Wyman estimates that this year is the second-best performing year in the industry's history, with gross profit estimated to reach $105 billion, although it is a 30% decrease from 2022, it is still about twice the historical average level.

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In comparison, the commodity industry's gross profit before the pandemic (in 2018) was about $36 billion, but in 2022, after the consecutive impacts of the pandemic and the Russia-Ukraine conflict, the industry's profit reached a record $148 billion.

Adam Perkins, a partner at the consulting firm and one of the authors of the report, said that the overall profit margin of the industry is quite good, but this is actually because the supply and demand are still very tight.

He also pointed out that independent traders - including groups such as privately held Vitol, Trafigura, Gunvor, and Mercuria - have performed particularly successfully, "setting the best annual record in history for five consecutive years." He said, "Therefore, when they have an absolutely huge cash reserve, the question they need to ask themselves is what can they do with this money?"

Vitol, the world's largest independent energy trader, submitted accounts in the Netherlands showing that the company achieved a record net profit of $15.1 billion in 2022, paying an average of $785,000 in wages and bonuses to 3,311 employees, and shareholder equity almost doubled to $25.8 billion. Most of the company's executives are in London, and it is expected to share its 2023 accounts with bankers this month.

Its competitor Trafigura announced that in the latest fiscal year ending last September, the net profit reached a record $7.4 billion, and the dividends paid to the company's 1,200 employee shareholders increased threefold to $5.9 billion.

Perkins said that one of the consequences of this is that some trading companies are gradually "changing jobs," using record profits to acquire the equity of wealthy executives and introduce other shareholders. In September last year, Trafigura reorganized its senior team, which was the largest-scale high-level reorganization of the company since the death of founder Claude Dauphin in 2015.Geneva-headquartered rival Mercuria's Global Head of Trading, Magid Shenouda, is retiring from the company, which is preparing to welcome the former Macquarie commodities business head, Nick O'kane. O'kane was one of the highest-paid bankers globally last year.

Record profits have also increased the cash available for acquiring processing and distribution businesses.

Vitol bid €1.7 billion last month to acquire Italy's Saras refinery, which owns the largest single refinery in the Mediterranean on Sardinia. In December last year, Gunvor, headquartered in Switzerland and majority-owned by Swedish billionaire Torbjörn Törnqvist, agreed to acquire a gas power plant in Spain from BP.

Data from Oliver Wyman shows that natural gas and electricity trading have surpassed oil as the industry's largest source of profit, contributing nearly half of the industry's gross profit in 2022.

The rapid growth in profits over the past five years means that scale is becoming increasingly important. Perkins said that the most successful traders are either the largest or dominant in a specific area, citing the success of Norway's Statkraft and Sweden's Vattenfall, both renewable energy specialists.

"It's a game of scale, but relative scale also works," he said, "What we're seeing are either giants or niche players."