The global commodity markets of 2025 are in the midst of a profound transformation, driven by the accelerating transition to clean energy. This shift is not just affecting traditional energy commodities like oil and natural gas, but is rippling through the entire commodity complex, creating new winners and losers in the process.
Renewable energy sources have moved from the periphery to the centre of the global energy mix. Solar and wind power, once seen as niche technologies, are now major drivers of commodity demand. The materials needed for solar panels, wind turbines, and energy storage systems – including copper, silver, lithium, and rare earth elements – have seen their values soar. Countries with large deposits of these “green metals” have become the new resource powerhouses, reshaping global trade flows and geopolitical relationships.
The rise of electric vehicles (EVs) has had a particularly significant impact on commodity markets. The demand for battery metals like lithium, cobalt, and nickel has exploded, leading to a surge in prices and spurring massive investments in new mining projects. The EV revolution has also begun to impact oil demand, with several major forecasters predicting that global oil consumption will peak before the end of the decade.
Natural gas has emerged as a key transition fuel, benefiting from its lower carbon intensity compared to coal and oil. This has led to increased investment in liquefied natural gas (LNG) infrastructure, with LNG trade volumes reaching new heights. However, the long-term future of natural gas is increasingly tied to the development of blue and green hydrogen technologies.
The hydrogen economy, once a distant prospect, is quickly becoming a reality. Green hydrogen, produced using renewable energy, is seen as a potential game-changer for hard-to-decarbonize sectors like steel production and long-distance transportation. This has created new linkages between renewable energy production and industrial commodity markets.
Traditional fossil fuel commodities, while still important, are facing an uncertain future. Oil companies are grappling with the prospect of stranded assets and are increasingly diversifying into renewable energy and petrochemicals. Coal, once the backbone of many industrial economies, has seen its use decline precipitously in power generation, although it remains important in steel production.
The agricultural commodity market is also being reshaped by the energy transition. The growth of biofuels has created new demand sources for crops like corn and sugarcane. At the same time, concerns about the environmental impact of biofuel production have led to increased interest in second-generation biofuels that don’t compete with food production.
Carbon has emerged as a commodity in its own right, with carbon trading schemes expanding and becoming more sophisticated. The price of carbon has become a key factor in investment decisions across many industries, influencing everything from energy production to manufacturing processes.
The shift towards a circular economy is beginning to impact traditional commodity markets. Increased recycling and the development of new recycling technologies are creating secondary supply sources for many metals, potentially reducing the need for primary extraction in the long term.
For commodity traders and investors, this new landscape presents both challenges and opportunities. The old playbook for commodity investing is being rewritten, with new correlations emerging between different commodity groups. Understanding the complexities of the energy transition and its cascading effects on various commodities has become essential for success in these markets.
Geopolitical considerations remain crucial, but the fault lines are shifting. Control over critical minerals and the technologies needed to process them has become a key strategic concern for many nations.
This has led to new alliances and tensions, as countries seek to secure their supply chains for the materials needed in the clean energy economy.
As we look to the future, it’s clear that the energy transition will continue to be the dominant force shaping commodity markets. The pace of this transition, influenced by technological developments, policy decisions, and changing consumer preferences, will be the key factor determining the fate of various commodities. For market participants, staying ahead of these trends and understanding their complex interactions will be crucial for navigating the commodity markets of 2025 and beyond.