• Platinum Prices to Rise: Expected to boost platinum demand from the fossil fuel and automotive industries, driving up prices
• Lithium Prices to Fall: Reduced emphasis on renewable energy in the US may slow the growth of the electric vehicle market
• Mixed Impact on Zimbabwe's Mining Sector: While Zimbabwe's platinum miners may benefit from higher prices, the country's lithium industry may face challenges

Harare- The United States President, Donald Trump, has withdrawn the United States from the Paris Agreement, citing national interests. Under the international climate accord, first negotiated in 2015, countries around the world agreed to cut greenhouse gas emissions in an effort to limit global warming and forestall the worst impacts of climate change.

Trump has argued that the agreement imposes unfair burdens on the American economy, and he withdrew the U.S. during his first term in office. The U.S. officially rejoined under President Joe Biden in 2021.

On January 20, 2025, Trump started the process again, signing an order onstage before supporters at the Capital One Arena, just hours after taking office.

From an American perspective, Trump's actions are driven by national interests. The U.S. is the largest oil producer in the world, holding significant oil reserves.

Abiding by the Paris Agreement would require the country to stop producing oil and transition to more expensive alternatives like solar and natural gas. This would put a heavy strain on the U.S. national debt, which is already soaring at $35.46 trillion as of 2024.

Trump plans to cut taxes for the wealthy, as per his election campaign promises, and to ensure that taxes do not offset federal coffers, production needs to be ramped up, starting with non-capital-intensive sectors. This will bring in jobs, revenue, and reduce costs.

Therefore, to cut taxes for the wealthy, funds will be channeled towards production, creating jobs and stimulating economic growth. Energy is the driving force behind production, and to reduce costs, energy should be cheap. Hence, withdrawing from the climate agreement.

Effects on commodity prices

The effects on commodities are significant. With the U.S. rejoining the climate agreement under Biden, Platinum Group Metals (PGMs) experienced a decline, resulting in a boom for lithium, considered a clean energy source.

The signing of the executive order has created ripples across global commodity markets, particularly for platinum and lithium. These two commodities are crucial to Zimbabwe's economy.

Platinum prices have experienced significant fluctuations over the past year. Early in 2024, prices were subdued, averaging around $900 per ounce due to sluggish demand in the automotive sector, which has been slowly replacing platinum with lithium.

However, a mid-year rally pushed prices above $1,000 per ounce, driven by renewed demand from the jewelry sector and increased interest in hydrogen fuel cell technology, which also relies on platinum.

Trump's emphasis on deregulating fossil fuels and scaling back international climate commitments is expected to create favorable conditions for the fossil fuel and automotive industries. These sectors rely heavily on platinum for catalytic converters and refining processes.

Due to these policies, platinum prices could see an uptick in the short to medium term as demand from fossil fuel and automotive sectors gains momentum in the U.S. market.

However, European markets, which are phasing out diesel vehicles, might offset gains in demand, keeping prices moderate.

Zim context

For Zimbabwe, a key producer of platinum through companies like Zimplats, higher global prices could stimulate increased mining activity, providing much-needed foreign currency and boosting employment.

This will also see the resumption of various platinum projects, either stalled or scaled back, including the Karo project, now scheduled for 2026.

Zimplats has slowed down on some projects within its $1.8 billion expansion plan, while Mimosa has scrapped a $100 million project.

Lithium

Lithium, the cornerstone of electric vehicles (EVs) and renewable energy storage, has been on an upward trajectory over the past year. Prices for lithium carbonate hit record highs in 2024, peaking at $70,000 per ton, driven by aggressive EV adoption in China and Europe.

However, prices softened towards the end of the year due to increased production in Australia and slower-than-expected demand growth in certain regions. Trump's withdrawal from international climate agreements and reduced emphasis on renewable energy could slow the U.S. EV market's growth.

This could dampen lithium demand in the U.S., one of the key drivers of the global market. Prices are also likely to remain subdued due to renewed tariffs on China, effective February 1, 2025, and continued use of fossils in other European nations, including Germany, despite most European countries and China continuing to lead the charge in renewable energy adoption.

Therefore, with U.S. policy changes, lithium prices are expected to remain subdued in the short term due to reduced demand and pressure on China through tariffs. China may scale back some of its investments in the sector. However, in the medium to long term, prices might stabilize or even rise moderately as international demand outpaces supply.

Zimbabwe has been investing in lithium beneficiation to maximize value addition. These efforts position the country well to benefit from global demand, even if U.S. demand growth slows.

The government has implemented measures to ban raw lithium exports, pushing miners to invest in beneficiation. Companies like Prospect Resources and Bikita Minerals are ramping up efforts to process lithium locally. If global prices stabilize or rise, Zimbabwe stands to benefit significantly.

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