How Trump's policies could change the LatAm mining industry

Changes in the US climate agenda could affect the mining industry in Chile and Latin America. 

President Donald Trump has abolished several clean energy and electromobility initiatives, which could lead to altering commodity markets, even though the energy transition continues globally and demand for minerals such as copper and lithium will remain high.

While the threat to impose import tariffs on products such as copper could also change prices, major US miners such as Newmont, Southern Copper, Freeport-McMoRan, Albemarle, Hecla Mining and Alcoa already have economic interests in the region.

BNamericas talks about the scenario with Jorge Cantallops, director of copper think tank CESCO and a former director of studies and policies at Chilean state copper commission Cochilco.

BNamericas: Will Chile’s mining industry benefit from Trump’s policies or face more problems?

Cantallopts: At the moment, no direct threats have been identified. Investments by North American companies in Chile continue to be very important and, probably, the shortage of raw materials will continue to be a relevant issue.

Regardless of Trump’s focus on Latin America, we don’t foresee any significant danger to existing investments or those underway, as these investments are critical for the United States as well. I don’t believe there’s a specific threat or risk to sectors like mining or others of importance.

BNamericas: Could the decision to eliminate energy transition policies and the goal to boost electromobility by 2030 affect copper and lithium miners in Chile?

Cantallopts: Revoking mandates is within presidential powers, such as modifying objectives or exiting the Paris Agreement. The truth is that, although the United States is a relevant player in electromobility, mainly due to Tesla, the rest of the North American automotive industry is a little more backward in this matter compared to the European or Chinese industries. 

However, it can impact demand projections for minerals, such as copper or lithium. But the truth is that demand projections are so high and exceed supply capacity for the next 10 years that a slowdown of that demand for a while may not be bad news from the point of view of equilibrium in the copper industry. 

But if that represents a rupture and is followed by the rest of the world, the consequences could be more complex for those minerals. Still, it's very difficult for electromobility to go back with a structural halt. It may certainly suffer delays, but I don't think we will go back on this global decision. So, it should be an adjustment or a slowdown, but not a structural change.

BNamericas: Could US tariffs on imports from countries such as Mexico, Canada and China disturb the international market and harm Chile's copper and lithium industries?

Cantallopts: What Trump is looking for with the increase in tariffs on these countries has to do with reactivating local industry, so it's a substitution of some import industry for local production. Therefore, the net should not be much affected. 

However, there are periods of adjustment, where changes and geographical imbalances may occur with the shortage of raw materials, but it's very difficult for there to be a decoupling at this moment in the minerals industry. 

In the last 40 years, there is not much evidence of decoupling in markets, given that they are quite integrated. But, of course, if a trade war were to escalate, decoupling could occur. 

By decoupling I mean a different balance in a market, whether it's a copper or lithium market oriented toward Asia or the US. Here, geopolitical relations could be relevant, and in my opinion, Chile should be as neutral as possible. 

Chile is an open country. It maintains commercial relations with the whole world, so we should try to maintain that path, especially regarding something as relevant as the supply of raw materials for the world and mining.

BNamericas: What other impacts could Trump’s policies have?

Cantallopts: They could generate a delay in technological development of cleaner energy in the US, given that the world is making strong progress in this area with a view to providing solutions to climate change. 

Beyond the opinion of some people, combating climate change involves highly mineral intensive measures, and new technologies are needed, and China has taken the lead and will continue to do so if the US does not accelerate the development of cleaner technologies. 

These four years may represent an opportunity to achieve a reactivation in a traditional economy like that of the US – but they could also cause a long-term setback for its economy.