2022, for example, soybean oil prices exhibited high volatility in response to intensifying competition from both renewable diesel and FAME producers in the United States amid limited supply from export markets. Feedstocks with limited or scattered availability and competing demand for alternative uses are at greatest risk of such volatility. The trading team will need to have a broad level of expertise across many different commodities and understand the interplay of those commodities in different markets and products. Specialist trading across high-volume commodities will still exist, but because each market will be influenced by a growing array of factors, traders will need far broader commodity knowledge to be effective.
In the coming decades, the sustainable-fuel market will be transformed by increased demand, substantial investment, disparate policies across regions, and technological advancements. Despite the many factors that will shape the market, rapid growth and volatility could offer enticing opportunities to capture value. Winning traders will develop new capabilities to track regulatory changes, monitor global trade flows, improve origination, and build out their trading teams to navigate this complex trading landscape.
Tapio Melgin is a partner in McKinsey’s Helsinki office, Agata Mucha-Geppert is a solution manager in the Warsaw office, Xavier Veillard is a partner in the Paris office, and Andrew Warrell is a partner in the Washington, DC, office.
The authors wish to thank Cherry Ding, Mikołaj Krutnik, and Nathan Lash for their contributions to this article.
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