After nearly 20 years of prosperous development, the current trade industry is facing multiple challenges such as slowing demand growth, compressing profit margins, and intensifying volatility risks. In the post pandemic era, how to adjust strategic goals, improve operational capabilities, and achieve sustainable profits at the turning point of the industry has become a major issue that trade enterprises cannot avoid.
Dilemma: The combined effects of multiple internal and external factors have led to a continuous compression of the survival space for trade business
The growth rate of demand has slowed down.
With the gradual shift of China's economic growth engine from investment and trade to consumption in recent years, commodity demand will find it difficult to maintain the high-speed growth of the past 20 years. Looking globally, emerging economies had already experienced a slowdown in economic growth before the pandemic, and the new complex international situation will further exacerbate the uncertainty of future global economic development. Commodities closely related to the economic situation are also unable to break free from the weakening demand growth rate. In addition, the proportion of global trade to GDP has gradually decreased from 50% in 2011 to 42% in 2020, and the economy's dependence on trade is decreasing. At the same time, the rise of global carbon neutrality and green development has greatly weakened the contribution of commodities to economic growth. In summary, the trade industry will face overall challenges of slowing market growth.
Profit margins are under pressure.
With the increasing concentration of upstream and downstream enterprises, the discourse power of intermediate traders is becoming smaller and smaller.
Taking iron ore as an example, the trade volume of the four major upstream mines accounts for nearly 70% of global trade volume, with a profit margin of over 40%; The profit margin of downstream Chinese steel companies is about 5%, while the profit margin of most iron ore trading companies is less than 2%. In the future, the concentration of downstream steel enterprises is expected to further increase, and upstream mines and downstream steel mills will continue to establish their own trading teams, accelerating the squeeze on the survival space of intermediate traders. In addition, the number of participants in the trade industry is also rapidly increasing. In 2021, the number of enterprises with import and export performance in China reached 567000, an increase of 5.3 times compared to 2001. The advantages of leading enterprises are also constantly strengthening. Overseas trade giants, with their mature management mechanisms, strict risk control, strong trading and research capabilities, and proficient financial derivatives operations, continue to enhance their market influence, bringing huge survival pressure to small and medium-sized traders.
