Mountains of wealth under the ocean

Tropic Seamount. No, not a hot favourite running tomorrow at Ascot, but an underwater mountain in the Atlantic Ocean, 300 miles from the Canary Islands, that is believed to contain rare earth minerals. The seamount is some 1,000 metres below sea level and has a thin coating of minerals across its surface. Samples recovered from the seabed using robotic submarines suggest it could contain the scarce element, tellurium, in concentrations 50,000 times higher than deposits on land. One scientist estimates that the seamount could contain some 2,670 tonnes of tellurium or about 8% of the world’s total supply. Unlike other rare earth elements, tellurium is actually very rare. Its occurrence in the earth’s crust is 0.001 parts per million, making it scarcer than gold.

Rare earth minerals are much sought after, as they are used in a range of modern technologies, including consumer electronics, computers, communications, clean energy, advanced transportation, health care, environmental mitigation, and defence. Cadmium-telluride is one of the latest, second generation, thin-film solar cell technologies. It’s better at absorbing light than silicon, so its absorbing layer can be much thinner. A layer of cadmium-telluride just one thousandth of a millimetre thick, will absorb around 90 per cent of light.

However, in order to produce a major green energy source, deep-sea mining would be required, which would have a major impact on the surrounding sea bed and marine life. It’s a dilemma for society.

Just how badly do we need rare earth minerals?

What have we been watching?

A quiet May Day end to the week for many markets. After the relief of the first round voting in the French election, investors turned their attention to the USA and Donald Trump’s tax plans. However, the French election is not over yet and tensions on the Korean peninsula remain strained. In addition, the leaking of May/Junker’s discussions hardly provides a helpful backdrop for future Brexit discussions. Sterling settled just under $1.29.

Donald Trump performed yet another U-turn last week. He said he will scrap plans to find cash for his Mexico border wall. Democrats had threatened to block budget measures to avert a US government shutdown if money was earmarked for the wall. Protectionism reared its head again as Donald Trump also threatened to broaden a trade dispute with Canada. Having imposed new tariffs on imports of Canadian softwood lumber he tweeted that Canada has ‘made business for our dairy farmers in Wisconsin and other borders very difficult’.

US Treasury Secretary Steve Mnuchin hosted the press conference to confirm the new administration will look to cut the US corporate tax rate from 35% to 15%. It is anticipated that the stronger economic growth this drives will counter the lower tax rate. However, one tax revenue raising tool, the controversial border adjustment provision to promote American manufacturing, is not yet ready to be implemented. Other measures include a one-off levy on overseas earnings of US companies and a simplification of the tax brackets for individuals. Given the failure of Trump’s healthcare reform proposals, investors will price a sizeable degree of execution risk around the tax plan and how the changes will be funded. The tax changes are likely to hit US householders in high tax states like California and New York and may cause problems for Republicans there.

US banks were in the spotlight after a media interview by president Trump who said he is actively considering a break up of Wall Street banks. He also suggested that he is open to increasing the US gasoline tax rate to help fund infrastructure development.

Is China beginning to exert pressure on North Korea? According to the BBC the price of petrol in Pyongyang jumped 83% last week as motorists rushed to fill their tanks on rumours China is considering halting the supply of crude oil to North Korea. However, the US military has started deploying a missile defence system in South Korea which is not going to please the Chinese.

As the dust settled on first round voting in the French election, analysis showed voters still seem divided over the issue of Europe. Some 49.4% of voters backed broadly pro-European candidates but 49.3% voted for anti-EU candidates on the far-right or far-left. So far, Centrist Emmanuel Macron remains favourite to win the final round on May 7^th and markets have breathed a sigh of relief. The French CAC share index hit a nine-year high. Following this vote, we have the German election in September 2017. However, before we all become too complacent, it is worth remembering that Italy is due to hold an election before May 2018 which could see the resurgence of the populist vote and more anti-EU feeling.

In the UK, manufacturer’s investment intentions hit a six-year low. However, optimism about export prospects are at the highest level since the UK joined the EU in 1973. Is the uncertainty about Brexit and potential trade barriers making companies cautious about stepping up long-term investment?

Finally, you can’t beat a classic bit of election tit-for-tat. Jeremy Corbyn has said that he wants to create four new UK-wide bank holidays on each patron saint day -St David’s, St Patrick’s, St George’s and St Andrews. A Conservative source responded to the announcement by saying ‘The British economy would be on a permanent holiday if Mr Corbyn got near Downing Street’.

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Mountains of wealth under the ocean

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