Pending US Infrastructure
deal an additional tailwind for metals
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IRON ORE TO CONTINUE
ITS CHARGE AS US INFRASTRUCTURE DEAL TAKES SHAPE
Iron ore prices may
stretch higher as the global economic recovery chugs along. However, the
industrial metal has seen a few road bumps on its journey higher. One of those
being recent actions by China – including plans to release state reserves – in
an attempt to cool off the quick appreciation seen in prices though H1 2021.
While actions by
China have put some overhead pressure on price, the underlying demand drivers
throughout the global landscape are likely to win out. One potentially major
tailwind for iron ore is the infrastructure deal currently being negotiated in
the United States. A deal between a bipartisan group of senators bolstered
optimism for a near $1 trillion package.
While its ultimate
fate remains unclear, the progress on Capitol Hill is a welcome development for
industrial commodities. Given the recent progress, a bill hitting President
Biden’s desk in the third quarter may be on the timeline. Along with a focus on
roads, bridges, and airports, a component focusing on electric vehicles may
also benefit the demand picture for metals.
The final deal is
likely to look different, but the current specifics include $109.0 billion for
roads, bridges, and major projects, $66 billion for rail, and $7.5 billion for
electric vehicle infrastructure, according to a White House fact sheet.
Moreover, Democrats are slated to push through a separate bill that could see
additional funding go specifically towards green energy infrastructure.
Combined with ongoing progress in the global reopening, iron ore prices are
likely to continue rising.
DailyFX