By Kasia Patel, Davide Ghilotti, Myles
McCormick and Albert Li
"We have to be unpredictable. And we have to be
unpredictable starting now," Donald Trump told supporters at a
campaign speech back in April.
Seven months later, fresh from his victory in the
race to become the 45th president of the US, that sentence
aptly encapsulates the sentiment that is sweeping through the
US public and the international community alike.
Trump’s win over Democratic candidate
Hillary Clinton brought about a storm of uncertainty over what
this may mean for the US and, indeed, the world.
During a year of campaigning, Trump promised to do
everything and the opposite of everything. His political
programme has been described as evanescent at best, unrealistic
and populist at worst.
In the coming months, IM will be
closely monitoring how the choices of the new presidency will
come to affect the industrial minerals markets we cover. In the
meantime, here is a first run-through a number of key sectors
that could be re-shaped by Trump’s political
Trade: wars or no wars
The news that Trump had defeated Clinton had an
immediate effect on a number of commodity markets. Copper
closed on a high yesterday and is on track to reach a
three-decade record today. The US dollar had a short-lived dive
as the results were announced, but quickly rebounded
The copper bubble and investors’
trust in the value of the US currency are mainly linked to
Trump’s bold proposals, which he reiterated during
his campaign, to pour money into domestic spending for
infrastructure projects across the country.
The outlook is less clear when it comes to
international trade, particularly for trade flows into the US.
Citing his willingness to prompt trade wars, Trump repeatedly
attacked existing trade deals such as Nafta and the
Trans-Pacific Partnership, and stated he would impose a 45%
duty on goods imported from China, to safeguard local
The consequences of such changes would be hard to
assess. A number of contacts active in minerals supply,
however, questioned the actual ability of the new president to
go about the stark trade plans.
One US-based lithium buyer told
IM he did not foresee the new president having
any major impact on the country’s ability to
import raw materials: "There is so much unknown [but] a lot of
it is hot air and rhetoric."
He said his sense was that the Chinese seemed less
concerned than the Europeans: "Most of the Asians think
he’s a pragmatic businessman (...)
He’s going to do what’s right for
A Chinese graphite exporter agreed with this
sentiment. He told IM he did not believe Trump
would follow through with his threat of adding heavy duties to
Chinese imports "because Trump is a businessman".
Strongly taxing imports of all raw materials from
China would be impossible, he added, as the US does not have
enough of its own supply to be self-sufficient.
He conceded that increased taxes on end products,
like steel or photovoltaics, may become a reality. But even if
they did, that should not affect raw material producers.
In Britain, the country’s ceramic
industries are keen to maintain trade ties open with the US,
particularly in a post-Brexit scenario, were the UK to leave
the European single market.
"The US is an important export market for UK
ceramics manufacturers," Laura Cohen, chief executive of the
British Ceramic Confederation, told IM.
"Members are keen to understand more about the
president-elect’s trade policies. It is important
we continue to look to influence a more beneficial trade
relationship for after the UK leaves the EU."
| The US Capitol
Trump has shown time and again to be an inveterate
supporter of fossil fuels and has claimed he would support
exploration and drilling activity on US soil for oil and gas
This may spell good news for the sluggish oil and
gas sector in the country, where drilling activity has plunged
on the back of falling energy prices.
In his acceptance speech, Trump talked about US
farmers being "harassed by the EPA [Environmental Protection
Agency]" and mentioned timber workers and coal workers, who
will now have "relief coming".
While Hillary Clinton had outlined her plans for
the environment on her campaign website, which she said would
have a focus on developing clean energy, environmental plans
were not listed under any of Trump’s political
Responding to what the election of Trump means for
the Dakota Access pipeline, environmental campaign group
Greenpeace said that Obama still has the ultimate say on
whether or not the pipeline moves forward.
"There is no doubt that Donald Trump poses an
immediate threat to our climate and will try to fast track this
and other fossil fuel projects across the country. This is all
the more reason for president Obama to step in immediately to
stop the pipeline once and for all," the organisation
"We will not allow Donald Trump to set back all of
the progress we have made on climate," Greenpeace added.
While oilfield services companies Halliburton Inc.
and Baker Hughes declined to comment on what the election might
mean for the unconventional oil and gas business, the American
Petroleum Institute was optimistic in terms of the future of
"We look forward to working with the new
administration on smart energy policies that protect the US as
the global leader in oil and natural gas production,
development and refining, as well as in reduction carbon
emissions," API said in a statement to IM.
"We are second to no one and we can build on this
success by joining together with policies that embrace our
nation’s energy renaissance including increased
energy production and infrastructure development while
rejecting policies that could potentially harm job creation or
raise costs on American consumers and businesses," it
Citing a voter poll conducted on election night,
API said that 80% of voters support increased development of US
oil and natural gas resources including 71% of Democrats, 94%
of Republicans and 76% of Independents.
The institute outlined that the US leads the world
in reduction of carbon emissions, with clean-burning natural
gas driving down emissions in the sector to 25 year lows.
However it added that the sector is currently
"With the oil and natural gas industry facing 145
regulations or other policy-setting activities that could
discourage production, preventing regulatory overreach should
be a top priority," API said. "A combination of industry
innovation, market forces and existing standards have proven
effective for keeping hydraulic fracturing safe and reducing
emissions of ozone, methane and carbon."
In response to the election results, shares in
mining equipment provider Caterpillar rose over 7% on
Wednesday, while shares for leading coal trader Glencore Plc
increased more than 5%.
Outlined are also plans to open onshore and
offshore leasing on federal lands, eliminate moratoria on coal
leasing and open shale energy deposits, in addition to becoming
and staying independent of imported energy from "the OPEC
cartel or any nations hostile to our interests".
Onshore drilling is a major end market for
industrial minerals like
silica (frac) sand,
barite (barytes) and
bentonite, but the US market has been hit by declining oil
and gas prices and oversupply in the sector. Onshore activity
fell 30% in 2015 and a further 20% in 2016 with rig count
dropping to a low of 417.
| Donald Trump.
Fracking: more than just
The political support that Trump could lend
drilling may give the sector the boost it needs to drag itself
out of the mud.
At the same time, the decline in drilling has
primarily been due to rock-bottom oil prices, rather than lack
of political support. Brent crude is trading today at just
below $45/bbl, but its price must steadily be above $60/bbl for
fracking to be economically worthwhile, IM sources said.
With this in mind, political backing alone would
not be enough to turn the US fossil fuel market around and,
with it, oilfield minerals.
Earlier this year, research and consultancy firm
predicted that a turnaround in
oil and gas industry investments is unlikely to materialise
before 2018 as demand growth over the next year is likely to be
outweighed by supply growth.
In both onshore and offshore drilling, the
industry has seen a 45% reduction globally since 2014.
"It’s not just a downturn localised in America.
We’ve seen the hit in China as well," Matt Cook,
the author of DW’s World Drilling and Production
Market Forecast, outlined.
Third quarter 2016 drilled and completed wells
contracted only 2.7% compared to an average of 17.3% in
quarterly declines over the last year and a half, according to
The API’s statistics department
director, Hazem Arafa, said that the figures indicate "that the
consistent decline in
oil and natural gas drilling could be coming to an
For its part, oilfield service provide Baker
Hughes managed to
reduce its loss by 44% in Q3 this year, following a dismal
series of results in 2015.
Revenue for Baker Hughes’ North
American segment increased 1% sequentially to $674m owing to an
increase in US onshore activity and a seasonal uplift in
However, Karl Rabago, executive director of the
Pace Energy and Climate Center questioned Trump’s
strategy of lowering prices and increasing production in the
current market environment.
"Would you drill another well in
today’s natural gas markets? Only if you were
carrying a huge portfolio of production loans and no revenues
to pay them back," Rabago told IM.
He added that "there is no value in debating the
merits and impacts of extreme and poorly conceived policies" as
these lend credibility to ideas that do not merit serious
discussions, and move the conversation away from real
"Overall, the good news is that markets are
powerful and mostly, over the long term, somewhat rational,"
The end of coal
The renewable energy sector is also a major
consumer of industrial minerals.
In 2015, solar energy applications absorbed 200m
square metres of flat glass, a figure which is expected to
triple by 2020 according to the
World Flat Glass report produced by US-based market
research agency The Freedonia Group in September. Its
production uses feedstocks such as silica sand, graphite,
feldspar, fluorspar, kaolin clay and soda ash.
In contrast with the shares of energy and coal
firms, shares of renewable energy companies dropped following
Trump’s election, with Vestas Wind Systems A/S
falling 13%, First Solar dropping 6% and SunPower dropping
At the same time, the movement in shares is not a
likely indicator of the future, according to Rabago.
"Short-term volatility is an opportunity for
short-term traders. It is not an indicator of the soundness of
under-developed energy policy notions," he told
While Rabago emphasises that coal workers have
suffered and deserve compassion, he said the coal industry
itself merits no relief, questioning whether the fundamentals
in the sector had changed: "Are coal stocks going to recover
from what has happened to them over the past several
| Wind farms.
"This is not the auto industry. No bailout is appropriate, in
my opinion, and it would cost us dearly (…) their
communities deserve our best efforts in support of
transitioning away from the dying industry to which their
fates have been tied," Rabago said.
Previous statements by Trump indicating he would
"rip up" the Paris Climate Change agreement - which he has said
is set to "give foreign bureaucrats control over (...) our
energy and how much we use" have made investors in the sector
Many states still back renewable energy, while the
decline of coal – which cannot compete with natural
gas and some renewables – is down to economics and a
changing energy scenario.
Referring to the Paris Agreement as a "wise and
reasonable measure", Rabago said that it remains to be seen
whether the US will take the lead in transitioning economies
away from climate-adverse activity, or whether it will become
dependent on other countries.
"Nations gather around responsible leadership
– if we do not offer it they will find it elsewhere,"
In terms of the the shift towards electrification
of the automotive industry, Chris Berry, founder of New
York-based House Mountain Partners LLC, a resource investment
advisory firm, told IM that this should remain
on course regardless of Trump’s policies.
The adoption of electric vehicles - whose
batteries are a source of demand for lithium, graphite and
cobalt - is driven, in Berry’s view, by two
distinct tailwinds - economic and regulatory.
Fears that Trump might dismantle incentives
towards vehicle electrification and clean energy generally are
widespread, based on his past comments.
He has previously described global warming as a
hoax invented by the Chinese to make US manufacturing
non-competitive, and the man leading his EPA transition team is
also a climate change skeptic.
But even were Trump to remove all government
incentives in this regard, the economic case should still stand
on its own, said Berry.
"Putting anti-clean energy people in place will
not derail it. It may slow it down. But it won’t
derail it," he added, noting that it may be more important to
watch state-level legislation than federal-level in this
In terms of the US mining industry more broadly,
Berry said the Trump presidency may be beneficial. Adding the
caveat that "it’s still too early to tell", Berry
said: "It looks as though Trump will be a friend to the
extraction industry in the US."
While the focus of this is likely to be in the
areas of coal, oil and gas, the mining industry generally is
likely to see gains, he added.
The country’s National Mining
Association (NMA) said in a statement sent to
IM that it looks forward to working with the
new president "on a wide range of issues of mutual
"A new administration and a new congress means a
new beginning," the association added.