Leadership Matters

Perspectives on the key issues impacting senior leaders and their organizations
April 3, 2023

Leadership Trends from the 2023 FT Commodities Global Summit

The annual gathering of leaders from the commodities industry took place against the backdrop of an unfolding crisis in the banking sector and a sanctions regime that has had a profoundly disruptive effect on the traffic of commodities around the world. We were proud once again to be a sponsor of the FT Commodities Global Summit and take part in this year’s discussions about the challenges and opportunities facing leaders in the sector.

2022 may have been a high water mark for the industry, a year in which price volatility resulted in substantial profits for commodity traders; the prospects for 2023 look less rosy. Leaders we spoke to at the Summit cited a range of factors likely to dampen activity over the coming year, including continued geopolitical uncertainty, slowing consumer demand, fragility in the finance system, and a complex sanction regime.

Below are some of the leadership trends we observed at this year’s Summit in Lausanne.

Sanctions have led to unintended consequences

The sanctions regime that followed Russia’s invasion of Ukraine have pushed up costs and created enormous complexity and disruption. One leader described the sanctions regime as a maze, while another commented that "regulators have created a monster they cannot control". Traders are being highly cautious as there is huge reputational loss in getting it wrong, however compliance by the major commodities houses has brought new, often unscrupulous players into the market and increased risk. The $60 price cap on Russian oil imposed by the G7 has resulted in the emergence of new traders operating dark fleets under the radar, moving barrels that larger traders cannot touch. Meanwhile, many global banks have been self-sanctioning and de-risking their portfolios to avoid litigation, resulting in legitimate traders operating within the rules finding it harder to get banking support.

The energy transition

In light of Russia’s invasion of Ukraine and the prioritization of energy security over decarbonization, few leaders are willing to predict the speed of the transition. However, there is widespread agreement that the transition is an unstoppable force, driven by the need for energy independence as well as climate change. A growing demand for nickel, copper and cobalt is inevitable, even if current stock levels of these and other critical raw minerals are extremely low at present. The need for better distribution of resources and processing of these and other metals essential to the energy transition is a major concern, especially in Europe where there is clear under-capacity.

Sustainability may have suffered a setback over the past year, but it is entirely consistent with delivering good returns to shareholders, since what the transition demands is the most efficient use of energy and natural resources to create maximum impact. In the words of William Reed, CEO of CCI, reliability, affordability, security and sustainability are all essential for the energy transition to be successful, and it is incumbent upon both business and political leaders to acknowledge that the solutions will necessarily be highly complex, will vary from country to country and will require greater levels of cooperation, especially between policy makers and business leaders.

Leaders must do more to explain the industry’s contribution to sustainability

The commodities industry plays a vital role in providing the minerals that make the world work and in helping bring about the energy transition, yet opposition to its activities is on the rise.

Leaders in the industry have an obligation to tell this story, but they are not doing so, according to Mark Cutifani, keynote speaker at the Summit dinner. The four basic elements of water, air, fire and earth identified by the ancient Greeks are just as relevant today when thinking about sustainability transformation. Mr Cutifani, who chairs the board of De Beers and was CEO of Anglo American between 2013 and 2022, stated that without a thriving minerals extraction and trading system enabling cities to build upwards, sprawling urbanization would cover 30% of the world’s land surface, as opposed to the 15% it covers now. Mining activities themselves take up just 2% of that 15%. Without the ability to mine, trade and ship commodities, environmental degradation would massively increase – “The fact is, we are one of the most positive environmental contributors on the face of the planet,” he said.

Commodities leaders must have the courage to talk to and work with those who oppose its activities (especially NGOs) to reach a common understanding about the critical contribution the industry can make to humanity in facing the many environmental and social challenges that lie ahead.