Trump gets strategic, here’s how investors can make the most of the trade war
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Thanks to the actions of Donald Trump, mining just got a whole lot more strategic — and these 35 minerals are shaping up as benefiting from a protracted trade war.
In case you’ve been living under a rock, the global economy is in rocky times.
With trade tensions between China and the US only getting worse and the impending time-bomb of Brexit on the horizon — everybody’s scrambling to position themselves.
The US government is no different.
But one of the more interesting themes to come out in recent times is the willingness of the US government to speak plain about its interests, and act on those interests — particularly when it comes to minerals.
For example, last year the US Department of the Interior published a list of 35 critical minerals (we’ll get into that later) which it deems to be “essential to the economic and national security of the United States”.
The list was drafted up as part of a broader executive order from Trump, with the main aim to lessen the reliance on foreign sources of these minerals.
It outlined several steps to alleviate the reliance on foreign sources of these critical minerals, including a commitment to make permitting and access easier for miners — with the department to report back to Trump on how to best achieve mineral independence.
It’s already been a benefit to companies such as Argosy Minerals (ASX:AGY), which has decided to look for minerals (in this case lithium) within the US.
Earlier this week it specifically pointed to the US push as an investment rationale for getting into its Tonopah project — pointing to commentary from US Secretary of Commerce Wilbur Ross upon handing Trump the report.
“These critical minerals are often overlooked but modern life without them would be impossible,” he said.
“Through the recommendations detailed in this report, the federal government will take unprecedented action to ensure that the United States will not be cut off from these vital materials.”
While the order from Trump was given in 2018, the wisdom behind it was seen earlier this year as rare earths (one of the 35 critical minerals) started to shape up as having major importance in the trade war between the US and China.
The supply of minerals, rare earths in particular, has informed much of the trade tensions between the US and China.
For example, the visit of Xi Jinping to the southern Chinese province of Jiangxi in May was a powerful reminder to Trump that China controls roughly 70 per cent of the world’s rare earths production.
Jiangxi itself holds 50 per cent.
It’s clear that Trump doesn’t want this situation to play out, and so instructed the US Department of the Interior to come up with the 35 minerals — as well as plans on how to lessen the country’s reliance on them, or diversify their supply of them at the very least.
So, what has it done to try and do that so far, and how may that flow all the way to Australia’s small cap miners?
What’s been interesting in recent times is how the US government has formally reached out to foreign companies around the world on mining projects.
For example, earlier this year it emerged (thanks to Reuters) that the US Department of Defense was in talks with Malawi’s Mkango Resources aimed at connecting capital for its rare earths project.
The offer reportedly came from the Pentagon’s Defense Logistics Agency — which speaks volumes about the minerals being about more than the ability to manufacture phones.
Meanwhile, the US government has tied up alliances with Canada and Australia specifically to develop vital minerals.
This push is also having a positive impact on the ASX’s slew of junior miners.
For example, last week helium company Renergen (ASX:RLT) bagged a $US40m ($59.2m) loan from the US Overseas Private Investment Corporation to get its South African project up and running.
In short, the US government is getting much more involved in the procurement of minerals — and these 35 minerals are catching its eye.
Expect the US government to be playing a more active role in projects associated with those 35 minerals.
So, what are they?
Below is the list of the 35 minerals the US government deems vital to national security — some common, and some not-so common.
They’re also commodities which could see an uptick on the demand side in the coming years as not only the US moves to secure more of them, but other nations try to sort out their supplies too.
Here they are:
Aluminium (bauxite): used in almost all sectors of the economy
Antimony: used in batteries and flame retardants
Arsenic: used in lumber preservatives, pesticides, and semiconductors
Barite: used in cement and petroleum industries
Beryllium: used as an alloying agent in aerospace and defence industries
Bismuth: used in medical and atomic research
Cesium: used in research and development
Chromium: used primarily in stainless steel and other alloys
Cobalt: used in rechargeable batteries and superalloys. You can find a list of ASX companies with an exposure to cobalt here
Fluorspar: used in the manufacture of aluminium, gasoline, and uranium fuel
Gallium: used for integrated circuits and optical devices like LEDs
Germanium: used for fibre optics and night vision applications
Graphite: used for lubricants, batteries, and fuel cells. You can find a list of ASX stocks with an exposure to graphite here
Hafnium: used for nuclear control rods, alloys, and high-temperature ceramics
Helium: used for MRIs, lifting agent, and research
Indium: mostly used in LCD screens
Lithium: used primarily for batteries. You can find a list of ASX companies with an exposure to lithium here
Magnesium: used in furnace linings for manufacturing steel and ceramics
Manganese: used in steelmaking
Niobium: used mostly in steel alloys
Platinum group metals: used for catalytic agents
Potash: primarily used as a fertiliser
Rare earths: primarily used in batteries and electronics
Rhenium: used for lead-free gasoline and superalloys
Rubidium: used for research and development in electronics
Scandium: used for alloys and fuel cells
Strontium: used for pyrotechnics and ceramic magnets
Tantalum: used in electronic components, mostly capacitors
Tellurium: used in steelmaking and solar cells
Tin: used as protective coatings and alloys for steel
Titanium: overwhelmingly used as a white pigment or metal alloys
Tungsten: primarily used to make wear-resistant metals
Uranium: mostly used for nuclear fuel. You can find a list of ASX companies with an exposure to uranium here
Vanadium: primarily used for titanium alloys. You can find a list of ASX companies with an exposure to vanadium here
Zirconium: used in the high-temperature ceramics industries