|Gage Skidmore, via
"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.
Trade: wars or no wars
The news that Trump had defeated Clinton had an immediate
effect on a number of commodity markets. The US dollar had a
short-lived dive as the results were announced, but quickly
The copper bubble - the market closed on a high after the
result was announced - 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 productions.
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
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 business."
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
"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.
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 resources.
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
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 the
"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
"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 over-regulated.
"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."
Trump also outlined 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.
Fracking: more than just politics
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,
Earlier this year, research and consultancy firm
Douglas-Westwood (DW) 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
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 API.
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
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
"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
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 issues.
"Overall, the good news is that markets are powerful and
mostly, over the long term, somewhat rational," Rabago said.
The end of coal
The renewable energy sector is also a major consumer of
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 years?"
"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
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," he said.
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,
"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 regard.
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 interest".
"A new administration and a new congress means a new
beginning," the association added.