Construction MMI: Biden infrastructure plans likely to offer support to metals prices

housing starts
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The Construction Monthly Metals Index (MMI) picked up by 4.4% this month, as December construction spending rose and the Biden infrastructure plan could serve as a major support beam for metals prices.
February 2021 Construction MMI chart

Biden’s infrastructure plans

Despite the typically bipartisan support — at least in word — infrastructure spending typically garners, a major infrastructure bill never came to pass during the Trump administration.
The House passed a $1.5 trillion infrastructure bill in July 2020. However, the bill never advanced further amid opposition in the Senate and from then-Senate Majority Leader Mitch McConnell.
So, what has President Joe Biden said about infrastructure?

As a candidate, he called for the construction of a “modern, sustainable infrastructure” to deliver an “equitable clean energy future.”
As president, Biden has already signed 25 executive orders. Among them, he signed an order outlining the administration’s vision for tackling the climate crisis.
“Despite the peril that is already evident, there is promise in the solutions—opportunities to create well-paying union jobs to build a modern and sustainable infrastructure, deliver an equitable, clean energy future, and put the United States on a path to achieve net-zero emissions, economy-wide, by no later than 2050,” the executive order reads.
In addition, the order calls for the chairman of the Council on Environmental Quality, the director of the Office of Management and Budget, and the National Climate Advisor, in consultation with the Advisory Council, to jointly publish recommendations on “how certain Federal investments might be made toward a goal that 40 percent of the overall benefits flow to disadvantaged communities.”
“The recommendations shall focus on investments in the areas of clean energy and energy efficiency; clean transit; affordable and sustainable housing; training and workforce development; the remediation and reduction of legacy pollution; and the development of critical clean water infrastructure,” the order continued.
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Infrastructure plans likely to boost some metals prices

As with the automotive sector, the transition to such a clean-energy economy and infrastructure is not something that can happen overnight.
With that said, a large-scale infrastructure plan would have a stimulative effect. Such a plan would provide new employment in addition to upgrading US infrastructure systems badly in need of upgrading, whether it’s aging public transportation, unsafe water delivery systems or outdated and polluting energy grids.
“Biden will make a $2 trillion accelerated investment, with a plan to deploy those resources over his first term, setting us on an irreversible course to meet the ambitious climate progress that science demands,” Biden’s campaign website stated.
Whether an infrastructure plan amounting to $2 trillion actually passes, a sizable plan will assuredly be supportive of metals prices.
For instance, as we noted in the Automotive MMI report, rising electric vehicle demand will spur copper demand. In the executive order on climate, Biden called for the deployment of zero-emission government vehicles, including for the United States Postal Service.

ABI slips in December

The Architecture Billings Index (ABI), released monthly by the American Institute of Architects, posted an index value of 42.6 in December.
The value declined from 46.3 the previous month. An ABI value less than 50 indicates billings decline.
“Business conditions at architecture firms backslid in December, ending a tough year on a disappointing note,” the ABI report stated. “The AIA’s Architecture Billings Index (ABI) score declined to 42.6 for the month, indicating that more firms saw declining billings in December than in November. Although some year-end softness is to be expected at many firms, the ABI analysis takes these seasonal factors into account, so it is unlikely the decline is due to just the typical December slowdown.”
By region, the South led the way with a value of 46.8. The Midwest came in at 43.6, followed by the West (43.4) and Northeast (38.8).
This month’s ABI survey question asked architecture firms about their profitability in 2020. Of the respondents, 52% indicated their 2020 profits fell below 2019 levels. Meanwhile, 32% reported their 2020 profits were significantly below 2019 levels.

US construction spending

US construction spending in December reached a seasonally adjusted annual rate of $1,490.4 billion, the Census Bureau reported.
The December rate marked a 1.0% increase from the previous month. Meanwhile, the rate marked a 5.7% year-over-year increase.
In terms of construction values, total construction value in 2020 reached $1,429.7 billion. The total marked an increase of 4.7% compared with 2019.
Private construction spending rose 1.2% to a rate of $1,137.6 billion. Under the umbrella of private construction, residential construction rose by 3.1% to $691.0 billion. Nonresidential construction fell 1.7% to $446.6 billion.
Meanwhile, the value of private construction reached $1,079.3 billion in 2020, or up 4.7 year over year.
As for public construction spending rose o.5% to $352.8 billion. Educational construction ticked up 0.6% to $90.2 billion. Meanwhile, highway construction rose 0.9% to $98.4 billion. In addition, the total value of public construction last year reached $350.5 billion, or up 4.8% year over year.

AGCA: Construction employment remains below pre-pandemic levels in most states

December construction employment in the US trailed pre-pandemic levels in 34 states, the Associated General Contractors of America reported late last month.
“While most states recorded construction employment gains in December, the pickup is likely to be temporary for many,” said Ken Simonson, AGCA’s chief economist. “Participants in our association’s recent Hiring and Business Outlook Survey expect the dollar volume of most project types available to bid on to decline in 2021.”
However, construction employment increased in 37 states from November to December.
In addition, the AGCA called for the Biden administration to help stem job losses in the construction sector. Among its requests, the association called for the Biden administration to invest in infrastructure and forgive Paycheck Protection Program (PPP) loans issued last year.

Actual metals prices and trends

The Chinese rebar price fell 2.5% month over month to $673 per metric ton as of Feb. 1. Meanwhile, the Chinese H-beam steel price rose 0.5% to $580 per metric ton.
US shredded scrap steel rose 14.5% to $459 per short ton. In addition, European commercial 1050 aluminum sheet rose 8.3% to $2,948 per metric ton.
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