Whether Clinton or Trump wins the election, US coal’s future is dark

The US mining industry value (MIV) will continue to decline regardless of the results of the US presidential election in November 2016, according to a new report from BMI Research. Of all the commodities, coal is the one that will continue to suffer the most. The decline could be greater with a Democrat in the White House, as the current high price of mining is likely to rise even more. On the other hand, a win for the Democrats could lead to an improvement in the outlook for the steel sector.

BMI’s prediction for the US focuses on coal, which made up 45% of the MIV in 2015. Other mining operations attract less political scrutiny, and will likely be less impacted by the election results. BMI predicts a continued decline for coal due to weak prices for thermal and metallurgical coal; significant coal stockpiles; and competition from cheap natural gas.

BMI is cautiously confident about a win for Democrat Hilary Clinton, giving her a 65% probability of winning. They also predict that the Democrats will take back control of the Senate. However, they expect the Republicans to retain control of the House of Representatives.

Clinton gains clearer margin over Trump

Source: RealClearPolitics

For the MIV, the most significant difference between a Republican and a Democratic win will be the impact on environmental regulations. The Obama administration has tightened environmental regulations, hastening the decline of the MIV by raising prices and pushing coal out of the power mix. These regulations could tighten further if Clinton wins – BMI forecasts a medium chance that Clinton will enact her environmental policies, which would exacerbate the decline of coal.

On the other hand, there is a more promising outlook for steel. First, Clinton is strongly opposed to foreign steel dumping. Second, BMI predicts a medium chance she will get her infrastructure spending plan through Congress. She will most likely not get the full USD275bn she proposed in November 2015, but even partial funding will be good for the steel sector, as a pillar of Clinton’s plan is bolstering domestic steel demands. This will not have an immediate impact, but could mean that the steel sector will start to grow again sooner than 2019 (the date BMI previously predicted).

Slight Upside Risk for Steel, Coal to Remain Downtrodden

e/f = BMI estimate/forecast. Source: EIA, BMI, USGS

If Republican Donald Trump wins, this could be better for mining, as he will attempt to loosen or even dismantle environmental regulations. If both houses of Congress are Republican (and there is only a 15% chance of this, according to the BMI), Trump will have more success. However, dismantling regulations will not be sufficient to offset the market factors that are forcing coal down. The best that can be expected is that the decline will slow down. So despite Trump’s promises, lay-offs in the coal mining industry will continue.