Commodity Markets Show Resilience: Macquarie Forecasts Near-Term Uptick Amid Volatility

The commodities market has been a rollercoaster for investors in recent years, but Macquarie Group’s latest outlook suggests a cautious reason for optimism. While the Australian financial powerhouse reported a 12% decline in its Commodities and Global Markets (CGM) segment profits for fiscal 2025 (FY25), executives now anticipate a “slightly up” trajectory for short-term commodity income. This shift reflects both structural adjustments and emerging opportunities in key sectors.

Navigating the Headwinds

Macquarie’s FY25 results revealed a challenging year for its CGM division, which posted a net profit of A$2.829 billion, down from A$3.213 billion in FY24. The decline stemmed from three primary factors:
1. Subdued Commodity Markets: Reduced hedging activity in EMEA gas, power, and emissions markets, coupled with softer demand for oil trading, pressured risk management revenues.
2. Timing Delays: North American gas and power contracts faced delayed income recognition, disrupting inventory management profits.
3. Margin Compression: Competitive pressures and liquidity challenges in select sectors further squeezed margins.

These headwinds were partially offset by strong performances in structured foreign exchange trading and equities, which contributed A$390 million to CGM’s results. Meanwhile, the Asset Finance division’s expansion in shipping, technology, and resources sectors added resilience.

Signs of Near-Term Recovery

Despite the annual decline, Macquarie’s management now points to three catalysts supporting its “slightly up” forecast for commodity income in the short term:

1. Improved Financial Markets Activity:
   The Financial Markets segment’s robust performance—driven by corporate and private equity client demand—suggests stronger risk management activity in the coming quarters.

2. Energy Transition Tailwinds:
   The push for decarbonization is boosting demand for critical minerals (e.g., lithium, copper, and cobalt) used in renewable energy infrastructure. Macquarie’s expertise in structured financing and project development positions it to capture this growth.

3. Geopolitical Diversification:
   While geopolitical risks persist—such as trade tensions and supply chain disruptions—Macquarie’s global footprint and diversified client base mitigate exposure to any single market.

Strategic Shifts in Commodities

Macquarie is recalibrating its commodity strategy to focus on adjacent opportunities rather than cyclical trading alone. Key moves include:
- Infrastructure Synergies: Leveraging its A$72.4 billion asset management platform to invest in energy transition projects, such as green hydrogen and solar farms.
- Digital Infrastructure Growth: The sector’s rising importance in global digitization is indirectly boosting demand for commodities like aluminum and rare earth metals.
- Patient Capital Allocation: With a CET1 ratio of 12.8% (exceeding regulatory requirements), Macquarie can deploy capital selectively into long-term commodity trends.

Risks on the Horizon

The outlook is not without challenges. Macquarie highlights:
- Geopolitical Volatility: Conflicts or trade policies could disrupt commodity supply chains.
- Interest Rate Fluctuations: While falling global rates improve financing conditions, sudden hikes could strain corporate balance sheets.
- Commodity Price Volatility: Critical minerals and energy markets remain prone to swings based on geopolitical and macroeconomic shifts.

Conclusion: A Balanced Outlook

Macquarie’s “slightly up” commodity income forecast hinges on its ability to capitalize on structural shifts while navigating near-term volatility. With A$177.7 billion in deposits and a robust capital position, the group is well-equipped to weather cyclical downturns.

The A$2.829 billion CGM profit for FY25, though lower than previous years, underscores its diversified resilience. Meanwhile, the 30% rise in Macquarie’s overall net profit (to A$3.715 billion) reflects the broader success of its non-commodity segments, which now provide a critical buffer.

Investors should note that the uptick is not a return to peak performance but a stabilization fueled by strategic pivots. As CEO Shemara Wikramanayake stated, “Our client franchises remain resilient, and we are leveraging adjacencies to navigate uncertainty.” For now, Macquarie’s commodities story is one of cautious optimism—a signal that even in turbulent markets, opportunities lie in adaptation and diversification.

Data as of March 31, 2025. All figures in Australian dollars unless stated.