The re-election of Donald Trump and renewed U.S.-China tariff tensions have propelled commodities markets into a precarious position. According to findings from RBC Capital Markets, even the slightest chance of tariff reductions may not fully reverse the damage inflicted on trade relationships and market thoughts.

Commodities Under Strain: RBC’s Observations

RBC leverages the industry cost curve as a key measure to assess potential price declines and their impact on production. The 90th percentile of this curve generally indicates price resistance, with breaches prompting output reductions:

Potential Earnings Hits from a Deepening Trade War

RBC’s assessments indicate severe potential drops in earnings for mining sectors:

• -13% decline expected in mining earnings if prices fall to the 90th percentile.

• -37% collapse projected should prices match the 75th percentile.

High-Risk Players

Miners positioned higher in the cost curve face the most substantial downside:

• Antofagasta (LON: ANTO) and Anglo American (LON: AGL)

  Vulnerable due to high copper exposure at elevated prices.

• Vale S.A. (NYSE: VALE)

  Could experience balance sheet strain and escalating capital expenditure demands.

Defensive Positions

Certain companies are better shielded from fluctuations due to pricing strategies, product diversification, or stronger financial positions:

• Norsk Hydro (OTC: NHYDY)

  Already accounting for aluminium prices near its cost base.

• Ecora Resources (LON: ECOR)

  Possesses stable revenue, minimal capital investment needs, and diversified cash flows.

• Glencore (OTC: GLNCY) and Anglo American Platinum

  Coal and PGMs trading within stable price ranges.

Market Valuation Concerns

• SXPP Index (global mining): -20% drop since tariffs were introduced.

• Market valuations are declining, revealing:

  • Price-to-NAV: 0.72x

  • EV/EBITDA: 4.6x
    This is below long-term averages yet above previous troughs.

During past economic downturns, the sector saw declines of 60%-75%, implying potential for further corrections.

Market Data and Monitoring Tools

• Commodities API
  Track real-time prices and trends in precious metals like copper, aluminium, and iron ore.

• Balance Sheet Statements API
  Evaluate financial stability across mining companies to identify those capable of withstanding prolonged pressures.

Conclusion

Commodities now find themselves caught in a broader trade war narrative. With copper, iron ore, and aluminium maintaining prices above crucial support levels, the risk of escalating price reductions and earnings declines persists, especially for higher-cost producers. Investors are advised to consider defensive positions with strong cash flows and diversified operations as market volatility evolves.