Commodity Rally Not Thanks to Trump

- David Mckay

Analysts are puzzling over the extent to which US president-elect Donald Trump has helped stimulate the world’s commodity markets further following a somewhat vague reference in his presidential campaign to invest in US infrastructure and lower taxes.

He referred to a $1tr, 10-year investment plan, but that remains the only indication of the scale of his plans for a possible stimulus package which, according to some analysts, is not enough to really boost global metals demand.

One idea, however, is that the continued improvement in the price of copper, iron ore and thermal and metallurgical coal may have more to do with actual Chinese infrastructure spend rather than the promised spend in the US.

“It is tempting to blame the sharp post-election rally in industrial metals prices on President-elect Trump’s platform of lower taxation and higher public spending on infrastructure,” said Goldman Sachs in a recent report.

“Instead,we would argue this rally was a continuation of a reflation trend put in place at the start of 2016 by the Chinese through credit stimulus aimed at infrastructure projects and policy-driven curtailments in coal where they have 50% of global production,” it said.