US President Donald Trump’s first address to Congress is scheduled for Tuesday night (February 28), and copper-focused investors are hoping he’ll give some indication of his plans for infrastructure spending and tax cuts.
Any specific proposals for infrastructure spending or tax cuts could impact supply and demand for the red metal, but Trump has had little to say on those topics since he finished campaigning.
“Now what we need to see is some real concrete plans from Trump. He’s promised a lot but hasn’t said very much recently on tax cuts and his grandiose infrastructure plans,” said Robin Bhar, head of metals research at Societe Generale (EPA:GLE).
During his campaign, Trump promised to spend $1 trillion on rebuilding the country’s roads, bridges and airports. More recently, he said on Monday in a White House meeting with US state governors that he anticipates “big” infrastructure spending and is seeking a “historic” increase in military spending.
Paul Ashworth, chief North American economist at Capital Economics, told CBC News he thinks that Trump’s address may include a call for tax incentives for private firms to build and administer public infrastructure projects.
But he and others have warned that even if Trump does want to encourage tax cuts and spending on infrastructure, Congress may not necessarily be in favor of that.
“We’re certainly not going to see a detailed plan for quite some time, I think, and even when we do see a more detailed plan from the administration, of course, then we do have to think about whether that would actually pass Congress,” said Ashworth.
Similarly, Reuters quotes Scott Colyer, CEO of Advisors Asset Management, as saying, “[t]he markets are very quiet right now waiting for some specifics on how much the President is going to ask for and how much he and his Congress can deliver, which is another story altogether. It will be clearer tonight than it is today. At least people are anticipating that.”
Ahead of Trump’s address, three-month copper on the London Metal Exchange fell 0.04 percent to reach $5,908.50 per tonne as investors took profits.
Strikes continue at top mines
Trump’s upcoming address to Congress isn’t the only factor affecting the copper price right now. Strikes at two major copper mines continue to cause supply concerns, and are helping to support the metal’s price.
The first strike is at the Chile-based Escondida mine, which is owned by BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT) and is the largest copper mine in the world. Workers there have been on strike for almost three weeks, and the conflict still seems to be far from ending.
While BHP CEO Andrew Mackenzie said on Monday that the two sides were “back around the table” after talks were cut off last week, the union representing the mine’s 2,500 workers said that’s not true.
“He is either misleading public opinion or someone is not informing him correctly. We have not been invited to participate in anything,” a union spokesperson said of Mackenzie on Monday. BHP is currently reviewing its copper output guidance because of the strike.
The second strike is at Freeport-McMoRan’s (NYSE:FCX) Grasberg mine in Indonesia. The company is locked in a standoff with the Indonesian government over permission to export copper concentrate produced at mine. Grasberg is the world’s second-largest copper mine.
Commenting on what the two disturbances could mean for the copper market, Cormark Securities analyst Stefan Ioannou said, “[a]cknowledging Escondida is the largest copper producer in the world, we do not expect the strike would meaningfully shift supply considerations unless it were to extend beyond four to six weeks.”
He added, “[t]hat said, market sentiment stemming from the strike in Chile stands to be amplified by uncertainty in Indonesia. We view concentrate export issues affecting Freeport’s Grasberg operation as a potentially longer-term issue.”
As strikes at the two operations continue, the chances that they will significantly impact the copper market — and the copper price — are on the rise. Investors will no doubt be keeping a close eye on any developments moving forward.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.