Will $1 trillion in improvements to U.S. infrastructure move global commodities markets?

Mines Grad Students Examine Possible Effects Trump Infrastructure Program

The White House has promised a $1 trillion program that would target the rebuilding of aging U.S. infrastructure. And the president has said the funding would come from a combination of the federal government and the private sector.

This week President Trump hosted a meeting at the White House of more than a dozen prominent U.S. CEOs. At the meeting the president told the business leaders, “At the top of our agenda is the creation of great high-paying jobs for American workers. … So with your help and insights, we will use the private sector innovation to drive job creation and reform government.”

The president asked Stephen Schwarzman, CEO of the Blackstone Group, for his comments. “We’ve been looking at trade, education and workforce development, energy and the environment, regulatory reform, and infrastructure.  All these things are really important, and we’re focused,” Schwarzman responded.

Colorado School of Mines graduate students examine effects of a $1 trillion infrastructure spend

Mines Grad Students Examine Possible Effects Trump Infrastructure Program

Standing (left to right): Colorado School of Mines graduate students Ghaith Al Ghaithi (MS), Micah Gowen (MS), Tisi Igogo (Ph.D.) and Ryan Riebau (MS) deliver a presentation focused on projected effects of a $1 trillion U.S. infrastructure spending program on global commodities. Seated: Ian Lange, Assistant Professor, Director Mineral & Energy Economics Program, Division of Economics and Business, Colorado School of Mines. The students’ presentation was part of a mock case competition in Lange’s graduate level class ‘Primary Fuels’. Photo: Oil & Gas 360

On the same day as the president’s panel of CEOs dug into the infrastructure and job creation topic, 15 Colorado School of Mines’ Masters and six Ph.D. candidates—14 in the Mineral & Energy Economics graduate program and one seeking a Ph.D in petroleum engineering, delivered presentations discussing possible effects of the president’s promised $1 trillion infrastructure program.

Mines Grad Students Examine Possible Effects Trump Infrastructure Program

Colorado School of Mines Ph.D. candidate Caitlin McKennie presents during a group analysis of a U.S. $1 trillion infrastructure program during a mock case competition hosted by Mineral and Energy Economics Program Director Ian Lange.

The graduate students were split into four groups to tackle the infrastructure analysis project. Some groups were more data-focused, modeling possible effects the $1 trillion spend could have on global commodity markets, while one of the groups focused on specific aspects of job creation from a large infrastructure stimulus—who would get the jobs; how would the training and execution of short-term, labor intense projects be transitioned into higher skilled work for one million to three million workers when the projects and the jobs they support mature from labor to technical in nature?

Virtually all the presenters lamented the lack of detail available to date on the administration’s infrastructure program promise, but they forged ahead guided by logical assumptions based on available information and available resources.

Presenters referenced a total of 50 projects, with government accounting for $137.5 billion and the private sector accounting for the balance. Commodities that presenters analyzed included cement, limestone, asphalt, steel, sand and gravel, iron ore, and copper—all components needed in order to retool highways, bridges, pipelines, transmission lines and improvements to the grid.

(Left to right): Colorado School of Mines MS – Mineral & Energy Economics candidates German Duarte, August Steinbeck, and Mohammed AlHusseini present their case analyzing the effects of President Trump’s proposed $1 trillion infrastructure build during a mock case competition at CSM this week.

Some of the presenters focused chiefly on the federal highway infrastructure spending plan, modeling aspects such as supply elasticity and the potential for substitution, imports versus domestic production. Commodities prices and supply effects from infrastructure spending were front and center, with conclusions that the global steel markets would not see significant effect from such a program, but that copper markets would. The group that focused on the jobs creation aspect calculated formation of 12 million jobs for road, bridges and rail, power transmission and pipelines.

The presentations by each of the four groups were judged by a four-person panel from three commodities-focused analytics and communications firms: FTI Consulting, Platts/McGraw Hill Financial and EnerCom Inc.

Assistant Professor Ian Lange, director of the Mineral & Energy Economics program at the Colorado School of Mines

CSM assistant professor Ian Lange hosted the mock case competition for his Mineral and Energy Economics graduate class ‘Primary Fuels’, which provides an overview of commodity market issues with a focus on upstream sectors.

When is the program coming?

According to The Hill, D.J. Gribbin, special assistant to the president for infrastructure policy, said that the timeline for Trump’s national rebuilding plan “will hinge on whether it is a standalone measure or if it is attached to another legislative priority. Gribbin said there would be some money for new and transformative projects in the plan, but that the ‘bulk’ of the proposal would focus on leveraging private-sector dollars and streamlining the lengthy permit approval process.” Transportation Secretary Elaine Chao said the package could be unveiled as soon as next month, the Hill reported.

According to a White House transcript from Tuesday’s meeting, the CEO group that is advising the President and his administration included Rich Lesser, Boston Consulting Group; Toby Cosgrove, Cleveland Clinic; Ginni Rometty, IBM; Mary Barra, General Motors; Paul Atkins, Patomak Global Partners, Dan Yergin, IHS Markit; Scott Pruitt, EPA Administrator; Larry Fink, BlackRock; Kevin Warsh, Stanford University; Mark Weinberger, EY; Jim McNerney, former Boeing CEO; Doug McMillon, Walmart; Indra Nooyi, PepsiCo; Matt Rose, BNSF; Philip Howard, Common Good; and Bayo Ogunlesi, Global Infrastructure Partners.

CNBC reported this week that President Trump has “taken a personal interest in infrastructure projects, given his background in commercial real estate and construction, asking New York real estate developers Richard LeFrak and Steven Roth to lead a new council devoted to giving him advice on infrastructure projects.”

LeFrak told CNBC that Trump “has to come up with a financing plan and I think there’s going to be a little bit of a tug of war between the conservatives in the Republican Party who are concerned about deficits and the president who’s concerned about jobs.”

As to the current vagueness of what the program would and would not include, Brian Pallasch, managing director of government relations and infrastructure initiatives at the American Society of Civil Engineers, told the Washington Post that Trump’s lack of specificity about his plans is a good thing: “It allows for the infrastructure community to have more input as the administration develops the plan, allowing us to have a broader conversation.” This week’s CEO input would corroborate that idea.

The Washington Post has published “six maps that show the anatomy of America’s vast infrastructure.”

Mines Grad Students Examine Possible Effects of Trump Infrastructure Program

Bridges in the U.S. infrastructure. Source: Washington Post

Washington observers say the definition of infrastructure in Washington is a moving target. While roads, bridges, power lines and pipelines generally come to mind for infrastructure, the Washington Post looked at airports, rail systems, ports and inland waterways as well. Some reports from Capitol Hill say aging hospitals and the Veterans Administration facilities and programs are being considered to capture some of the $1 trillion. Some members of Congress want schools to be included.


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