SMU Data and Models

SMU Market Trends: Is Infrastructure Next?

Written by Tim Triplett

In addition to the tax overhaul passed by the Republicans this week, President Trump has promised a trillion-dollar infrastructure overhaul. Given the possible $1.5 trillion cost of the tax cuts, will the public have the stomach for another big bill to fix the nation’s aging roads and bridges?

Respondents to Steel Market Update’s market trends questionnaire this week were evenly split on whether to expect an infrastructure package out of Washington that will boost steel demand next year. Their comments fall into four groups: those who are hopeful for at least some additional infrastructure spending, those who believe there is no way Congress will tackle another big spending package, those who point out there will be no effect on steel demand next year even if an infrastructure bill is passed, and those who see politics preventing anything positive. Following is a sampling of comments from steel buyers.

From the hopeful:

  • “Not sure how big, but they will pass something on infrastructure.”
  • “They will try, but it will likely be trimmed down.”

From the doubtful:

  • “After the tax bill is signed, how will the federal government finance a big infrastructure bill? Increase the deficit even more? Not going to happen.”
  • “Infrastructure is the one legislation that both parties can agree on, although they would argue over the total amount and how to fund it [given the tax bill’s passage].”

From the pragmatic:

  • “Even if passed quickly, it will be 18 months to two years before it will effectively change demand. Will it cause a blip in pricing? Sure, but no effect on demand for a while.”
  • “Even if they do pass a bill, it will take time before steel demand is impacted in a positive way. 2019 would see the new demand from a bill if passed in 2018.”

From the disillusioned:

  • “I do not expect this administration to get much accomplished.”
  • “Tough to get any Democrats to support any initiative by the Trump administration.”
  • “I have no faith in Washington to move any cohesive agenda forward.”

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