During his campaign Donald Trump promised to push through a $500 billion spending program to build bridges, roads, railways, schools and hospitals early next year and the president elect has aspirations of $1 trillion in infrastructure build-out in the US over the next decade.
The surge in industrial metals prices and steelmaking raw materials following the surprise victory of Trump has definitely cooled – copper for example is down 10% from its intra-day high a week ago. Other base metals had been rising strongly long before the vote and the recent frenzy for met coal and iron ore also seems to be on the wane.
While a notable boost to the domestic market, this translates to less than 1% of additional global steel and copper demand growth over the next four years
A new report by BMI Research, a Fitch company, says even if a Trump administration is able to keep much of its promises of fiscal stimulus (not that likely – a Republican-led Congress blocked a similarly-sized plan by Barack Obama at the height of the financial crisis), the impact on global mining markets will be minimal.
BMI gives several reasons for its highly skeptical view of the infrastructure plan and its potential to lead to a metals demand surge including a likely ‘America First’ metals procurement policy under the program and a global supply response to any increase in demand in the US thanks to weakening local currencies.
But the number one reason is one of simple math. The US is just not a big enough metals consumer to move global markets and prices:
Under a best-case scenario for Trump’s infrastructure plan, we would expect to see average US steel and copper demand growth of 4.4% and 4.6%, respectively over 2017-2020, reflecting an additional 4.0% and 3.0% annually to our core scenario forecasts.
While a notable boost to the domestic market, this translates to less than 1.0% of additional global steel and copper demand growth over the next four years. For both metals, this amount would not substantially tighten the global market balance, and, as such, provide negligible upward pressure to prices.
We estimate that the US accounted for only 8.1% and 7.1% of global refined copper and crude steel demand in 2016. These figures are dwarfed by China’s copper and steel market shares of 47.8% and 44.5%, respectively.
5 Comments
Jan Jee
That was a hell of a breakout on copper though!
http://www.nasdaq.com/markets/copper.aspx?timeframe=3y
scanspeak
There are secondary effects of infrastructure spending (employment, confidence, disposable income, etc) that are being ignored in this article.
Robert_S_Stewart
Manufacturing worldwide will spark renewed interest in mineral production.
Bubba James
So what Mr. Els ? It’s time to put “AMERICA FIRST”. The worldwide mining industry will be much better off with Mr. Trump than with crocked socialists like obama/clinton. Finally (good) change is coming.
Charles Driver
TRUMP FOR PRISON 2017. The orange jumpsuit will match the orange buffoons face. Pfft, like the orange buffoon is really going to ravage his midwest republican renewable energy base to help a few miners in the rust belt states who have already given him what he wants. Snowflakes, let me tell you how it is going to go down…1. he’ll make a big show of trying to get all trade agreements thrown out. (It will eventually work out that nothing materializes but it is enough to prime you meat eaters when he rolls around in 2019 looking for your votes.) 2. He’ll start breaking ground on several bridges, etc..and make sure all of you see it on FOX, just in time to get your votes for 2020. As soon as 2020 has hit and he’s back in office, the money for all those projects will dry up and not one will see completion.
But this is where the orange buffoon truly excels, he’ll bait you rust belters just enough to get your vote for 2020 which is critical given that it is a census year and gerrymandering begins. You would have handed him the power to gerrymander your butts out of being swing states. The repugs will hold the house for years to come and most likely the presidency and the only things the dems will get out of it, is the satisfaction of at least knowing the power you gave him will be stolen from you by him. No more talk about swing states, EVER. For the dems reading this, take heart, this might be what is needed to take the power out of the swing states hands, we just have to be quiet and sit through it. The good news is and the smart repugs know this part, when 2035 hits, regardless of gerrymandering the population will be a lot less ‘white’ and you could start winning again and never have to worry about those 4 foolish rust belt states because the repugs will dismantle them in 2020 with gerrymandering. Everything has an upside.