Commodities lose as Trump’s business councils disband

President Donald Trump’s decision last week to disband the Manufacturing Council and Strategy & Policy Forum not only puts his agenda to revitalize the nation’s infrastructure in jeopardy, it also weakens the precarious support commodities such as copper, steel and crude oil have relied upon.
Although not stellar, global commodity prices had shown decent support ever since it became clear that Trump had a shot at the White House, with infrastructure at the top of his agenda. His promise to “rebuild our country with American workers, American iron, American aluminum, and American steel” while touting a Mexican border wall, became the crutch for a deeply wounded industry facing excess inventories alongside more efficient manufacturing and raw material applications.
As recently as August 15th he issued an executive order directing federal agencies to more quickly review the environmental effects of infrastructure projects, a bid to speed up the construction of the roads, rails, bridges and pipelines he has promised.
And now the crutch has broken. The destruction of both councils—whose members included the heads of prominent American companies ranging from Merck to General Motors, and BlackRock to JPMorgan—delivered a major setback in the eyes of traders to a president priding himself on being a businessman and fierce negotiator from his time as a real estate developer and reality television star. These leaders, who previously agreed to join the forums to advise Trump on economic issues, collaborated to step down from their respective positions and disband the councils after his controversial remarks surrounding the white supremacist marchers in Charlottesville, Virginia.
Surely these appointed posts were more symbolic and ceremonial rather than tactical or strategic. Nevertheless, they were prestigious and provided an essential means toward to helping design Trump’s agenda and much-needed education on how to build out our nation’s infrastructure. But business leaders are less inclined to side with Trump’s rhetoric, seeing it as too much of a lightning rod to be associated with their companies. There was already a tense relationship between the White House and corporate executives, many facing pressures from employees, customers, shareholders and counterparties, in addition to activist, to take stands on social and political issues, at times, putting them in direct opposition to the president.
None of this bodes well for the commodity sector, and particularly for those commodities consumed in infrastructure and building projects. Within the commodity complex, base metals and energy are likely to bear the brunt of price pressures. With the exception of lumber, few in the grains and soft commodities should be affected.
After seven months into his presidency, with little to nothing materializing on the infrastructure front, the challenges are big.

—Bloomberg