With Trump’s Commerce Secretary, Wilber Ross, currently speaking in his confirmation hearing, it is convenient that overnight Barclays released a report looking at steel demand in the US as a result of Trump’s proposed stimulus projects, an area that will be of substantial focus by Ross as he seeks to revitalize the moribund US steel sector.
That said, Barclays notes that while the potential demand from US infrastructure is there, it notes that it is skeptical on implementation for two main reasons. One is the rising risk of protectionism:
we think that hopes for a large infrastructure boost are premature, and the risks from potentially increased US protectionism are a significant headwind to higher global consumption. The potential for a large rise in commodity demand is certainly there, but we think that the market is “trumping up” the likely effects of Trump’s policies, as additional infrastructure spending requires rapid execution to yield the full metals’ demand boost.
Second is the still overarching lack of clarity about Trump’s plan:
Given the unknowns about Trump’s infrastructure plan – lack of clarity on total spend, past ineffectiveness of stimulus efforts, timing of implementation, pushback from Congress – we currently model no additional metals demand from supplemental infrastructure investment during 2017-18 into our baseline forecast. As greater visibility becomes available, we will adjust our consumption forecasts to take into account the latest spending plans. The key issue we think is facing the metals sector is that even if infrastructure spending is approved at the headline level ($1trn over 10 years, or $100bn a year) and implementation is effective, the project schedule does not allow for an immediate effect on metals consumption, particularly over the next two to three years.
And while Trump’s plans may or may not materialize as rapidly as home hope – or may be hindered entirely due to the rise of protectionism – Barclays has compiled this handy list of the top 10 infrastructure projects currently under planning or development in the US. As it notes, of the top 10, 7 are in the planning or conceptual phase. According to Cg-LA, an infrastructure consulting firm, and the average time to complete an infrastructure project currently stands at 9.5 years, meaning that many of the identified projects will not be completed during 2017-18.
The projects have a combined cost of $132.6 billion, and have the potential to materially boost demand for both copper and steel, not to mention create tens of thousands of jobs.
As for the final, and rhetorical, question – whether California really needs a high-speed rail system at a cost of $68 billion – it remains open for debate.
via http://ift.tt/2iRvnNT Tyler Durden