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Gauging the Trump effect on global commodities

There is perhaps no better reminder that the US presidency is a position of extraordinary power. Since the victory of US President-elect Donald Trump last week, businesses and governments have been working overtime to try to discern exactly what his presidency might mean for a range of important policy areas.

Across the world, every campaign statement, interview, tweet and early appointment by Trump’s transition team is now being carefully examined for clues as to how the newly-elected Republican will act once he moves into the White House.

The questions over the President-elect’s positions are more numerous than they would have been had Democratic rival Hillary Clinton triumphed. Trump has never held public office previously, and made many bombastic statements on the campaign trail that have so far been backed up by little in the way of detail.

Businesses operating in the commodities sector are every bit as hungry for information as others. Trump’s surprise victory has left many in the industry uncertain, puzzled and “scratching their heads over what to expect from this Washington outsider,” said Chris Newkumet, S&P Global Platts Bureau Chief in Washington, DC.

Newkumet spoke during a special Platts webinar, which was held November 11 to explore the possible ramifications of a Trump presidency for the oil, coal, gas, power and steel sectors. During the webinar, titled The Trump Effect: Energy, Commodities and Their Markets, senior Platts’ editors drew attention to many of Trump’s stated positions and sought to give a flavor of how the next four years could change commodities markets.

Of all the areas discussed, steel is the one in which the overall picture was most upbeat. Trump portrayed himself as a stout defender of domestic steelmakers during the campaign, ready to slap tariffs and countervailing duties on cheap imports as necessary. He also said he would double a five-year plan unveiled by Clinton calling for $275 billion in infrastructure spending, noted Joe Innace, Metals Content Director, Americas.

Look at other sectors, and the picture gets murkier. Trump has positioned himself as a supporter of the coal industry and is expected to abandon President Obama’s Clean Power Plan, which would necessitate some coal-to-gas switching. That may be interpreted as being broadly positive for coal and negative for gas in the generation mix. But due to current economics, it is unlikely to lead to either a sharp fall in the use of gas, or a large-scale reprieve for ageing coal-fired plant, said Jasmine Melvin, Editor of Inside FERC.

Trump’s enthusiasm for new oil and gas pipelines is shared with congressional Republicans and is expected to become a cornerstone of his new energy policy. Still, while this seems like good news for US exports, the outlook is complicated by his anti-free trade rhetoric, including a proposed renegotiation of NAFTA and his rejection of the Trans-Pacific Partnership.

When it comes to oil, Trump has promised to do all he can to boost domestic supply, roll back a host of regulations affecting the industry, and expand drilling in federal lands. But as Brian Scheid, Senior Editor, Oil News, said, it was unclear how some of these things would materialize. For instance, while Trump would like to expand drilling in federal waters, the Obama administration is shortly expected to unveil a five-year plan for oil leases and sales that could partially tie his successor’s hands.

More generally, expansions and contractions in US oil production tend to occur with little regard to changes in administration. Since Obama came into office pledging to tackle climate change and reduce the country’s dependence on fossil fuels, oil production had jumped by as much as 65%, Scheid pointed out.

The picture is certainly complicated, and the next four years will feature a host of other variables – including the state of the global economy, the level of the US dollar and worldwide geopolitical developments – that will complicate this picture further still. Even so, the discussion is thought-provoking.

One thing is certain: whatever effect the Trump administration has on global commodities markets, you can be sure it will be fully covered by Platts.

A replay of the webinar can be accessed here.