Explore the commodities market, the most volatile commodities, supply and demand risks, and how strategic procurement teams manage price volatility and supply chain risk.

The commodities market sits at the foundation of the global economy. From crude oil and natural gas to copper, steel, lithium, wheat and coffee, commodities are the raw materials that keep manufacturing, construction, transportation, food production and technology moving.

But commodity markets are rarely predictable.

Prices can move sharply because of geopolitical events, weather, trade restrictions, changing consumer demand, production disruptions, currency movements and shifts in global economic growth. For companies that rely heavily on raw materials, these fluctuations can quickly translate into higher costs, margin pressure and supply chain disruption.

That is why strategic procurement has become increasingly important.

Modern procurement teams are no longer simply negotiating the lowest possible purchase price. They are being asked to understand commodity markets, anticipate supply shortages, manage supplier risk, develop alternative sources and create commercial strategies that protect their organizations from extreme price volatility.

For businesses navigating this environment, having the right procurement and supply chain talent can be just as important as having the right suppliers.

What Is the Commodities Market?

The commodities market is a global marketplace where raw materials and primary agricultural products are bought and sold.

Commodities are generally divided into several major categories:

• Energy: crude oil, natural gas, coal and refined fuels
• Metals: copper, aluminium, nickel, zinc, lead and tin
• Precious metals: gold, silver, platinum and palladium
• Agricultural commodities: wheat, corn, soybeans, coffee, sugar and cocoa
• Livestock: cattle and other animal products
• Critical minerals: lithium, cobalt, graphite, rare earth elements and other materials important to technology, energy and advanced manufacturing

Commodity prices are influenced by the fundamental forces of supply and demand, but those forces are affected by a much larger set of variables.

For example, a drought can reduce agricultural production. A geopolitical conflict can disrupt energy or mineral exports. A new trade restriction can limit access to a critical raw material. Meanwhile, an increase in electric vehicle, renewable energy or data-centre investment can create new demand for materials such as copper, lithium and rare earth elements.

This makes commodity procurement fundamentally different from buying a standard manufactured product.

Why Are Some Commodities More Volatile Than Others?

Not every commodity experiences the same degree of price volatility.

Some markets have relatively diversified production and multiple substitutes. Others depend on a small number of producing countries, have limited alternatives or require years of investment before new supply can come online.

Several factors can make a commodity particularly volatile.

1. Supply Concentration

When production or refining is concentrated in a small number of countries or companies, an individual disruption can have an outsized effect.

The International Energy Agency’s 2026 Global Critical Minerals Outlook notes that the concentration of refining has increased across several energy minerals. In 2025, the average share held by the top refined supplier reached approximately 70% across key energy minerals. For materials such as gallium, graphite, manganese and rare earths, China accounted for more than 90% of global refining supply.

This creates significant procurement risk.

If a company depends heavily on one region for an essential material, a geopolitical event, export restriction, infrastructure failure or production interruption can quickly become a business problem.

2. Limited Substitutes

Some commodities are difficult to replace.

If a manufacturer can easily substitute one material for another, a price increase may encourage buyers to switch. But where technical specifications, regulatory requirements or manufacturing processes require a particular material, procurement teams have fewer options.

The IEA identifies several critical minerals where limited substitutes increase supply risk, including chromium, titanium and germanium.

3. Long Lead Times

Mining and processing projects can take years to develop.

That means supply cannot necessarily respond quickly when demand increases. A sudden increase in demand can therefore create a significant gap between what buyers need and what producers can deliver.

This is particularly relevant to critical minerals supporting electrification, batteries, renewable energy infrastructure and advanced technology.

4. Geopolitical Risk

Commodity markets are particularly sensitive to geopolitics.

Export controls, sanctions, tariffs, political instability and conflicts can affect the movement of raw materials around the world.

The result can be a combination of higher prices, longer lead times and increased competition for available supply.

5. Weather and Climate

Agricultural commodities are especially exposed to weather conditions.

Droughts, floods, hurricanes, changing growing conditions and other extreme weather events can affect crop yields and therefore prices.

Energy infrastructure can also be affected by weather, while changing climate conditions can influence long-term agricultural and resource availability.

Which Commodities Are Currently Experiencing Strong Demand and Supply Pressure?

There isn’t one universal list of commodities that are simultaneously “high demand and low supply.” Conditions vary by geography, grade, processing stage and time period.

However, several critical minerals are attracting particular attention because demand is growing while supply chains remain concentrated or difficult to expand.

Copper

Copper is one of the most strategically important industrial metals because of its role in electricity networks, construction, manufacturing, renewable energy and electrification.

The IEA reports that copper demand remains a major supply concern and that copper-focused companies increased investment by 8% in 2025, reflecting the industry’s expectations around long-term demand.

For procurement leaders, the challenge isn’t simply the price of copper. It is also securing reliable access to the required volume and grade over the long term.

Lithium

Lithium demand has grown rapidly because of its role in batteries and energy storage.

The IEA reports that lithium demand increased by approximately 25% per year on average over the previous two years, while lithium prices more than doubled amid stronger demand and constrained supply conditions.

Lithium also illustrates an important procurement lesson: a commodity can move from oversupply and falling prices to supply concerns relatively quickly.

Nickel

Nickel is another important battery and industrial commodity.

Supply growth has been heavily concentrated. According to the IEA, Indonesia has been responsible for a very large share of recent nickel supply growth, illustrating how geographic concentration can create procurement exposure even when total global production is increasing.

Graphite and Rare Earth Elements

Graphite and rare earth elements are particularly important because they are used in batteries, magnets, electronics and other advanced technologies.

The challenge is not necessarily geological scarcity alone. Processing and refining capacity can be just as important.

For example, the IEA identifies graphite and several rare earth elements among the materials where refining is highly concentrated.

This means procurement professionals increasingly need to understand the entire value chain, rather than simply asking who mines the material.

Strategic Minor Minerals

Smaller commodity markets can sometimes create disproportionately large procurement risks.

Materials including gallium, germanium, tungsten, tellurium and certain rare earth elements are used in strategically important applications but have relatively concentrated supply chains.

The IEA reported that prices for several strategic minor minerals more than doubled between 2024 and early 2026, with tungsten prices increasing particularly sharply.

For companies that depend on these materials, supplier diversification and supply security can therefore become more important than simply negotiating a lower unit price.

How Are Strategic Procurement Teams Managing Commodity Price Volatility?

The role of procurement has changed considerably.

Instead of reacting to a supplier’s price increase after it happens, sophisticated procurement teams are increasingly focused on identifying exposure before it becomes a problem.

Here are some of the strategies being used.

1. Supplier Diversification

One of the most common strategies is to avoid excessive dependence on a single supplier, country or region.

A diversified supplier base can give procurement teams alternatives if one source becomes unavailable or commercially unattractive.

However, diversification is not as simple as adding another supplier to an approved-vendor list.

Procurement teams need to evaluate:

• Geographic exposure
• Financial stability
• Production capacity
• Quality
• Logistics
• Lead times
• Political risk
• Regulatory exposure
• Tier-two and tier-three supplier dependencies

The goal is to create genuine optionality rather than simply having multiple names on a supplier database.

2. Long-Term Supply Agreements

Long-term contracts can provide greater supply security and, depending on the structure, greater price predictability.

Contracts may include:

• Fixed pricing
• Index-linked pricing
• Volume commitments
• Minimum purchase agreements
• Price adjustment mechanisms
• Price ceilings or collars
• Take-or-pay arrangements
• Flexible volume provisions

McKinsey notes that companies can use long-term contracts, indexed pricing and price collars as tools for allocating commodity risk between buyers and suppliers.

The right structure depends on the company’s risk tolerance and the underlying commodity market.

3. Commodity Hedging

Some organizations use financial hedging to manage commodity price exposure.

Depending on the commodity and the organization’s capabilities, this can involve instruments such as futures, swaps and options.

However, hedging is not a substitute for good procurement strategy.

It needs to be connected to actual physical requirements, sales exposure, inventory and overall margin management. McKinsey has highlighted the importance of integrating procurement, sales and operations planning when managing commodity-price risk.

4. Should-Cost and Price Analytics

Data is becoming an increasingly important procurement tool.

Advanced procurement teams can monitor commodity prices and build models that estimate how changes in raw-material costs should affect supplier pricing.

This allows procurement professionals to ask better questions:

What should this product cost?

How much of the supplier’s proposed increase is actually attributable to commodity movements?

Which component of the supplier’s cost structure is changing?

What happens to our margins if the commodity increases another 10%, 20% or 30%?

McKinsey identifies predictive analytics, should-cost modelling and scenario analysis as emerging capabilities for managing commodity exposure and supporting procurement decisions.

5. Inventory and Strategic Stock

Holding additional inventory can provide a buffer against supply disruptions and short-term price increases.

But inventory isn’t free.

Higher stock levels can increase working capital requirements, storage costs, obsolescence risk and inventory price exposure.

Strategic procurement teams therefore need to determine where additional inventory genuinely improves resilience and where it simply transfers one type of risk into another.

6. Alternative Materials and Specifications

In some industries, procurement works directly with engineering, R&D and operations to identify alternative materials.

This could involve:

• Qualifying alternative raw materials
• Redesigning products
• Approving additional grades or specifications
• Developing alternative manufacturing processes
• Working with suppliers on material substitutions

The ability to substitute inputs can dramatically change a company’s negotiating position.

7. Scenario Planning

Rather than assuming that commodity prices will follow one forecast, procurement teams can build multiple scenarios.

For example:

Scenario A: Commodity prices decline 15%

Scenario B: Prices remain stable

Scenario C: Prices increase 20%

Scenario D: Supply is disrupted for six months

The team can then determine what actions should be triggered under each scenario.

This turns commodity management from a reactive activity into a structured risk-management process.

McKinsey recommends scenario planning and maintaining an updated procurement playbook for changing commodity and macroeconomic conditions.

The Talent Behind Modern Commodity Procurement

Technology and analytics are important, but organizations still need experienced professionals who can interpret the data and turn it into commercial decisions.

This is where procurement talent becomes strategically important.

Modern strategic procurement professionals may need a combination of:

• Commodity-market knowledge
• Strategic sourcing experience
• Supplier relationship management
• Contract negotiation
• Financial analysis
• Risk management
• Data and analytics
• Forecasting
• International sourcing
• Supply chain expertise
• Stakeholder management

Procurement organizations are also facing a talent challenge. McKinsey has identified shortages in both traditional procurement capabilities and the technical and analytical skills required to use advanced digital technologies.

For employers, finding professionals with this combination of commercial, analytical and supply chain expertise can be challenging.

That is where specialist recruitment can add value.

Why Procurement Talent Matters in a Volatile Commodities Market

A company can have sophisticated procurement technology, detailed market intelligence and strong supplier contracts, but it still needs people who know how to use those tools effectively.

A strategic procurement leader might be responsible for answering questions such as:

• Where is our commodity exposure greatest?
• Which suppliers represent a concentration risk?
• Should we lock in prices or maintain market exposure?
• How much inventory should we carry?
• Which suppliers could provide an alternative source?
• Should contracts be fixed-price or index-linked?
• What happens to our margins if commodity prices rise?
• Where can engineering or product design reduce material exposure?
• Which risks should procurement own, and which should be transferred through contracts or financial instruments?

These are strategic questions—not simply purchasing decisions.

As a result, companies increasingly need procurement professionals who can operate across finance, operations, supply chain, engineering and commercial functions.

What Should Companies Look for When Hiring Strategic Procurement Talent?

Whether an organization works with internal recruiters or a specialist supply chain recruitment agency, the hiring criteria for commodity-focused procurement roles should go beyond years of experience.

Look for evidence of:

Commercial judgment

Can the candidate balance price, availability, quality and risk?

Commodity expertise

Does the candidate understand the specific markets and cost drivers relevant to the business?

Negotiation capability

Can they structure contracts that appropriately allocate price and supply risk?

Analytical skills

Can they interpret market data, build cost models and understand financial exposure?

Supplier management

Can they build resilient relationships while maintaining commercial discipline?

Cross-functional leadership

Can they work effectively with finance, operations, engineering, sales and executive leadership?

Risk management

Can they identify supply vulnerabilities before they become disruptions?

These capabilities are increasingly valuable as procurement moves from a transactional function toward a strategic business discipline.

The Role of Supply Chain Recruiters in Building Procurement Capability

Finding experienced procurement professionals can be difficult, particularly in specialized commodity markets.

A general recruitment process may identify candidates with purchasing experience, but that doesn’t necessarily mean they understand commodity risk, strategic sourcing or complex supply markets.

This is where specialist supply chain recruiters can provide a more targeted approach.

A specialist supply chain recruitment firm can help organizations identify professionals with experience across areas such as:

• Strategic sourcing
• Commodity management
• Category management
• Procurement leadership
• Supplier development
• Supply chain planning
• Contract management
• Procurement analytics
• Risk management

For organizations operating in Canada’s manufacturing, energy, mining, food, automotive, construction or industrial sectors, working with experienced supply chain recruiters in Canada can also provide access to candidates with relevant local and international market experience.

Businesses looking for procurement talent in the Greater Toronto Area may also work with supply chain recruiters in Toronto who understand the region’s broader manufacturing, logistics and industrial talent market.

The objective isn’t simply to fill a vacancy.

It is to find the people capable of helping an organization manage increasingly complex supply, cost and risk challenges.

The Future of Commodity Procurement

Commodity markets will always experience cycles.

Prices will rise and fall. Supply disruptions will occur. New technologies will change demand. Governments will introduce new trade policies. Companies will discover new sources of supply and new substitutes.

The organizations that are best prepared are not necessarily those that can predict every commodity price movement.

Instead, they are building procurement organizations capable of responding quickly when conditions change.

That means combining:

Market intelligence + supplier diversification + commercial strategy + analytics + risk management + strong procurement talent.

As critical minerals, energy transition technologies and global supply-chain complexity continue to reshape commodity markets, strategic procurement professionals will play an increasingly important role in protecting business continuity and margins.

And for companies looking to build that capability, the question is no longer simply:

“What price can we negotiate?”

It is:

“How resilient is our supply, how exposed are we to commodity volatility, and do we have the talent to manage it?”

Frequently Asked Questions About the Commodities Market

What is the commodities market?

The commodities market is the global marketplace for raw materials and primary products such as oil, natural gas, metals, agricultural products and livestock. Prices are influenced by supply, demand, geopolitics, weather, economic conditions and other market factors.

Which commodities are the most volatile?

Volatility varies over time, but commodities exposed to geopolitical risk, concentrated supply, limited substitutes and sudden changes in demand can experience significant price movements. Energy products, agricultural commodities and certain critical minerals can all experience substantial volatility.

Which commodities are currently in high demand?

Demand is particularly strong for several materials supporting electrification, batteries, renewable energy and advanced technology. These include copper, lithium, nickel, graphite and rare earth elements. The IEA reports that demand for key energy minerals has been growing substantially faster than demand for base metals in recent years.

How can procurement teams manage commodity price volatility?

Common approaches include supplier diversification, long-term contracts, index-linked pricing, strategic inventory, commodity hedging, alternative materials, should-cost analysis and scenario planning.

Why is procurement talent important in commodity management?

Commodity risk management requires more than purchasing skills. Organizations increasingly need professionals who understand markets, suppliers, contracts, financial exposure, analytics and supply chain risk.

How can supply chain recruiters help?

Specialist supply chain recruiters and recruitment agencies can help organizations identify candidates with experience in strategic sourcing, commodity management, procurement leadership, category management and supply chain risk—particularly where highly specialized expertise is required.

Commodity markets are becoming increasingly important to corporate strategy.

For procurement leaders, volatility is not simply a pricing problem. It is a supply continuity, financial, operational and talent challenge.

Organizations that invest in resilient supplier networks, better market intelligence, sophisticated contracting and experienced procurement professionals will be better positioned to respond when commodity markets change.

For companies building these capabilities, partnering with a specialist supply chain recruitment agency, supply chain recruitment firm or experienced supply chain recruiter can be one component of developing the talent required to manage the next generation of commodity and supply-chain risk.