The much-anticipated US infrastructure plan will boost demand for metals but is unlikely to "fuel the commodity cycle", ANZ (ANZ) said in a report.
"on the face of it, the US infrastructure program should accelerate the US economic recovery," the agency said. This may boost demand for metals, but it may not give impetus to the commodity cycle as many hope. "
The report examines the impact of the $1 trillion U. S. infrastructure bill, which seems to be getting closer to final passage. The bill is a top priority for US President Joe Biden, and its prospects look optimistic as the Senate progresses over the weekend.
* the impact of steel demand is limited, and copper demand will increase significantly *
ANZ estimates that about $500 billion will be spent on roads, bridges and highways. This will increase steel demand to 120 million tons from 105 million tons in 2019, the report said.
Traditionally, the construction industry has been the biggest contributor to most metal demand. As a result, the spending plan should particularly boost demand for copper and zinc. The real stimulus will be the $7.5 billion investment in electric vehicle infrastructure. Overall, we expect copper demand growth to reach double digits in the next year or two. "
When the final infrastructure bill is finally passed, it will include something that is far from certain.
As a large portion of the spending is spent on education and training, ANZ predicts that only 55 per cent of the spending will be spent on bridges, ports, public transport systems or airports. This means that the overall impact on commodities is low.
"the boost of infrastructure to steel demand will be limited. Investment in infrastructure such as roads, bridges and highways is critical to the economic performance of any country. Republicans and Democrats are likely to approve funding for such projects. Many roads and bridges in the United States were built decades ago, and now there are safety problems. Some bridges are structurally defective and obsolete drinking water and water systems are endangering public health. " "the level of infrastructure investment may have only a small impact on steel demand," Hynes and Kumari said.
* the demand for non-ferrous metals is promising *
ANZ added that 10 per cent, or about $213 billion, would be used to build and renovate affordable housing.
Of this amount, about $40 billion will be used for the maintenance and upgrading of public housing. However, most of comfortable housing is made of wood or concrete frames, and the amount of steel used in these houses is limited. Cabling and cables will increase demand for copper, while total demand will not show significant annual growth. The construction and construction industry consumes 22% of the nearly 800000 tons of copper demand in the United States. 23%. " "the construction of 2 million homes will generate nearly 320000 tons of copper demand within eight years, with a very optimistic estimate of 400000 tons per year."
The report also said that electric vehicles could increase demand for metals under bipartisan infrastructure spending plans.
Under President Biden's initial stimulus package, there were high hopes for metal demand in new industries.
Of the $621 billion in special funds for transportation, the electric vehicle industry is expected to receive $174 billion in investment. However, the latest bipartisan agreement includes only $7.5 billion in car charging stations and another $2.5 billion in electric buses. "
"this will require nearly 2 million tons of copper over the next 10 years, equivalent to 200000 tons per year. That would increase US demand for 1.9 million tonnes of copper by 10 per cent, or global demand by 1 per cent. Aluminum and nickel also benefit from sales of electric vehicles. "
In 2019, infrastructure investment was about $840 billion. "assuming that $500 billion of additional infrastructure investment is evenly distributed over the next five years, growth will return to 2019 levels," the report concluded. "
"this suggests that copper demand growth is likely to return to double-digit levels."
Overall, the impact of US infrastructure spending on international commodity markets will be "significant".
ANZ said, "US steel imports accounted for about 20 per cent of total demand in 2019. However, US steelmakers have been reluctant to increase capacity over the past year. Instead, after a long period of weakness, they seem keen to benefit from higher premiums and stronger prices. This may stimulate import demand. We also believe that the base metals market will benefit from it. The United States is even more dependent on imports of raw materials than on steel. Given that potential demand is expected to be well above trend in the coming years, this should support prices. "
