THE MOST

FAMOUS AND
COMPETITIVE
INTERNATIONAL
COMMODITY
MARKETS
Ishchenko Yuliia
ME.m-01a
The most famous and competitive international
commodity markets
• Commodities are the basic building blocks of the global economy, upon which
most other goods are created. They fall into two broad categories. ‘Hard’
commodities are natural resources that must be mined or extracted. These include
energies such as oil and natural gas, and metals such as gold and aluminium.
‘Soft’ commodities, on the other hand, are agricultural products such as crops and
livestock.
• Commodity markets are popular with traders because prices can be very volatile,
meaning there are often opportunities to profit by going long or short. Factors that
can affect pricing include consumer trends, weather patterns, infrastructure,
government policies, economic performance, reserve levels and currency
valuations, among others.
What are the most traded commodities?
The top ten most traded commodities in the world are:
1. Brent crude (oil)
2. Steel
3. WTI crude (oil)
4. Soyabeans
5. Iron
6. Corn
7. Gold
8. Copper
9. Aluminium
10. Silver
1. Crude oil: Brent crude
• Crude oil is one the world’s most in-demand commodities as it can be refined into products
including petrol, diesel and lubricants, along with many petrochemicals that are used to make
plastics. Brent crude is one of the two major types of oil used to benchmark global prices, along
with West Texas Intermediate (WTI). It is a high-quality ‘sweet light’ oil, meaning it has a low
sulphur content and density, and is therefore relatively easy to refine into usable end products. It is
drilled from oil fields in the North Sea’s Brent, Oseberg, Forties and Ekosfisk fields, off the shores
of the UK and Norway. This proximity to the coast makes it relatively cost effective to transport
internationally.
2. Steel
• Steel is an alloy of iron and carbon that often includes other elements such as manganese, chromium,
nickel and tungsten. It is an important commodity because it is extremely strong and relatively low
cost, making it suitable for industrial uses in construction, infrastructure and manufacturing.
• As a result, steel prices have historically been fairly well correlated with global economic
performance – generally rising and falling in line with economic output. However, as an alloy, its
price is dependent on the cost of its constituent products and the costs of shipping them. In recent
months, prices have also been heavily influenced by Trump’s trade war with China, which has seen
the president impose tariffs on non-US steel.
3. Crude oil: West Texas Intermediate (WTI)
• West Texas Intermediate (WTI) crude – referred to
as US crude on IG’s platform – is the second type of
crude oil on our list. It is another high-quality ‘sweet
light’ oil, which has an even lower sulphur content and
density than Brent crude. WTI oil is drilled in various
US states – including Texas, Louisiana and North
Dakota – and sent to Cushing, Oklahoma for price
settlement.
• In the past, prices of WTI oil have been heavily
dependent on US consumption. This is because Cushing
is a landlocked area, making it difficult to transport oil
internationally and leading to a divergence in the cost of
WTI and Brent crude barrels. However, the recent
reversal of the ‘Seaway Pipeline’ to take oil from
Cushing to Freeport, Texas (on the Gulf of Mexico) –
instead of in the opposite direction – has made it easier
to export this commodity, which has generally seen
prices more closely correlated with Brent crude.
4. Soyabeans
• Soyabeans – known in the US as ‘soybeans’ – are an important commodity, primarily because they
are rich in protein and relatively cheap to produce. They are used to make a variety of food and
agricultural products, including soyabean meal (animal feed), soyabean oil, and meat and dairy
substitutes such as tofu and soy milk. They can also be used to produce biodiesel. The majority of
soyabeans are grown in the US, followed by Brazil, Argentina, China and India.
5. Iron ore
• Iron ores are the rocks and minerals from which iron can be extracted. The vast majority of iron
ores are used to produce pig iron, which, in turn, is fed into steel production. However, extracted
iron can also be used to produce cast iron, magnets and catalysts for various industrial and
chemical uses.
• Iron is a very bountiful commodity and is relatively easy to mine. This has meant that historically
there has normally been sufficient supply to meet demand, and that prices have been relatively
stable. However, since 2000 there have been significant fluctuations in price due to changing
Chinese consumption. The country has rapidly urbanised – requiring vast amounts of steel – and
experienced phenomenal economic growth. Because of this, Trump’s tariffs have also had an
indirect effect on iron ore, with prices falling due to a reduction in demand.
6. Corn
• Corn – also known as ‘maize’ – is an important soft commodity. It is a food source that is used
primarily to produce animal feed, ethanol, corn syrup and starch. There are several varieties of
corn – the main ones being dent, flint, pod, popcorn, flour and sweet corns. The majority of corn is
grown in the US, followed by China, Brazil and Argentina.
• Much like soyabeans, the price of corn is heavily dependent on the demand for animal feed and
biofuels, as well as the strength of the US dollar and weather patterns. Agricultural subsidies –
particularly US subsidies – can also have an effect on prices. Corn production is currently heavily
subsidised in the States, which provides a strong incentive for production and helps maintain
global supplies.
7. Gold
• Gold is a precious metal that has been highly sought after for millennia, due to its metallic yellow
colour and sheen. Nowadays it is primarily used for jewellery production and as an asset for
investment. However, a small amount is also used in industry as it is highly resistant to most
chemical reactions and conducts electricity. The majority of gold is mined in China, followed by
Australia, Russia and the United States.
8. Copper
• Copper is an important base metal because it is an
exceptionally good conductor of both heat and
electricity, and is also corrosion resistant and
weatherproof. It is primarily used to manufacture
electrical wire, pipes, roof tiles and industrial
machinery. However, it is also used to produce
alloys including brass and bronze. Copper is
primarily mined in Chile, followed by China, Peru
and the US.
• Because of its many uses in industry and
electronics, the price of copper can fluctuate
significantly in line with economic output. Supply,
on the other hand, can be affected by trade disputes,
seasons and infrastructure concerns – particularly
within key South American suppliers such as Chile
and Peru.
9. Aluminium
• Aluminium is another important base metal, one that is exceptionally light and corrosion resistant.
It is often combined with other elements – such as copper, zinc and magnesium – to form alloys
that are both strong and light. For these reasons, aluminium, and alloys containing it, are useful for
commercial applications including the manufacture of vehicles and planes, packaging (eg cans)
and construction. The majority of aluminium is produced in China, followed by Russia, Canada
and India.
10. Silver
• Silver is the second precious metal on our list, and is another element that has been highly sought
after for thousands of years. Unlike gold, roughly 50% of demand for silver can be attributed to its
industrial uses, which include solar panels, photographic films and electrical contacts. Like gold,
however, a large proportion of demand for silver is also driven by jewellers and investors.
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