How Biden’s Win Affects Commodities Hit by Trade Wars, Tariffs, , on November 8, 2020 at 12:00 pm

By ILP
On 11/08/2020
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(Bloomberg) — It’s been a tumultuous four years for U.S. commodity industries that found themselves a key focus of the White House through its aggressive trade policy agenda.From steel and aluminum tariffs to grain subsidies to boosting exports of liquefied natural gas, very few corners of the global commodities market eluded Donald Trump’s attention. There was at least one memo, executive order, pronouncement or tweet bringing some sort of attention to uranium, soybeans, and rare earths, the kinds of materials that haven’t received attention from American presidents in years.Now, with Joe Biden winning the election, how will the next U.S. president diverge from his predecessor, and where he might keep the status quo?Steel and AluminumThe biggest issues in steel and aluminum are very similar, given these two industries — especially steel — were a top priority for the Trump administration. Tariffs aren’t expected to go away any time soon under Biden, and market participants have adjusted for the 25% duty on steel imports and the 10% levy on aluminum.Removing them would be like catching a falling knife: It would alienate voters across the Midwest who helped Biden across the finish line. It would also lead U.S. Steel Corp. and Century Aluminum Co., among others, and the United Steelworkers union to lobby for some sort of new trade action to protect their industries.Biden is more likely to maintain the tariffs and work with key allies — including the European Union, Japan and Canada — to form a bloc opposing the subsidies China gives to its industries, which produce more than half of the world’s steel and aluminum. The Trump administration openly shunned multilateral trade partnerships, so this would be a big change in policy. It’s still unclear, though, what policies Biden would enact to further protect the industries, both of whom claim need more help.LNGTrump administration officials criss-crossed Europe and Asia in 2019 touting U.S. LNG exports as “freedom gas” and “molecules of U.S. freedom,” but trade wars hurt sales as did environmental concerns over flaring in the Permian Basin and other emissions associated with production and shipment.Biden didn’t state a position about LNG on his campaign website but boasts a plan to reduce methane emissions and flaring, which European buyers would welcome. Biden was vice president when the Obama administration approved permits for all six of the current LNG export terminals.Political observers believe that Biden would bring the U.S. back into the Paris Agreement, an environmental treaty between nearly 200 nations to reduce greenhouse gas pollution. With buyers across the globe seeking greener or carbon-neutral LNG cargoes, the move might benefit U.S. exporters.“Our biggest concern is American LNG exports to Asia and to Europe, and how those have declined as a consequence of some of these trade wars,” said Mike Sommers, the president of the American Petroleum Institute. As a previous longtime member of the Senate Foreign Relations Committee, Biden “has a firm understanding of how important American energy independence is from a foreign policy perspective as well,” he said.OilEnergy will likely be on the table in U.S. trade talks with China.“As long as U.S. energy production such as shale oil, LPG and natural gas exceeds domestic demand, America would be an exporter,” said Sandy Fielden, director of research for Morningstar Inc. “So China, as the world’s largest consumer, will use energy as a bargaining chip. A Biden administration would implement a measured trade policy without the Trump tit-for-tat noise.”“With a Biden victory, what you’re going to expect is a lot less trade uncertainty, and that is great for oil prices,” said Edward Moya, a senior market analyst at Oanda Corp. “We see the best demand when globalization is trending.”Despite ratcheting up sanctions on Venezuela’s state oil company, Trump wasn’t able to dislodge Nicolas Maduro. Analysts say that a Biden victory won’t necessarily reverse all the measures taken against Maduro.Biden will seek to re-enter the 2015 Iranian nuclear deal and lift sanctions on the country, according to RBC Capital Markets’ Helima Croft. “We continue to anticipate Iran being able to return around 1 million barrels a day of exports back to the market by the second half of 2021,” Croft said in a note.DairyU.S. officials have pushed for stricter Canadian enforcement of the terms of dairy trade outlined in the U.S.-Mexico-Canada Agreement, an area that could see fresh attention after the election. Only a small portion of U.S. cheese, dry milk and other dairy products crosses the border to Canadian markets. Still, many American dairies and processors have insisted that primarily their lower-value ingredients like powders are imported by Canada, while higher-value finished products like fine cheeses are largely barred. The U.S. and other large dairy producers around the globe have also criticized Canada’s below-market-priced exports as unfair competition.A Biden presidency may slow some progress the industry is pushing for as guidelines around trade between the U.S. and Canada cement through the end of the year. While dairy policy tends to capture bipartisan support, some market watchers are concerned that Biden’s team may not share the Trump administration’s skepticism of Canada’s dairy trade and pricing systems, potentially delaying or tempering efforts to change them.GrainsA Biden presidency could lead to warmer trade relations with China, supporting the rally in corn, wheat and soybeans, which hit a four-year high. He may roll back tariffs on Chinese goods, paving the way for more U.S. exports of agricultural products to Asia.Exports to China have surged, but that’s largely due to market forces that made America the best source of corn and soybeans. Many earlier this year speculated that China would wait until the election to question the phase-one trade deal or trigger a clause that allows the Asian nation not to fulfill its pledges due to the pandemic.Even with the surge in the second half of the year, shipments of agricultural and related products through September were about 38% of the deal target. The U.S. Trade Representative’s office said last month that 71% of the target has been reached.China is rebuilding its hog herd more quickly than expected after being hit by African swine fever, a deadly virus that kills most infected pigs within 10 days. The Asian nation has already purchased a record amount of American corn, and sales of soybeans are running at their highest level in data going back to 1991. U.S. pork exports are at a record and sorghum and beef sales also gained a boost.“China is implementing and purchasing under the phase one agreement,” Dave MacLennan, Cargill Inc.’s chief executive officer, said in a Bloomberg TV interview. But “most of the activity we believe is driven by pure economics, demand driven,” he said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.,

How Biden’s Win Affects Commodities Hit by Trade Wars, Tariffs(Bloomberg) — It’s been a tumultuous four years for U.S. commodity industries that found themselves a key focus of the White House through its aggressive trade policy agenda.From steel and aluminum tariffs to grain subsidies to boosting exports of liquefied natural gas, very few corners of the global commodities market eluded Donald Trump’s attention. There was at least one memo, executive order, pronouncement or tweet bringing some sort of attention to uranium, soybeans, and rare earths, the kinds of materials that haven’t received attention from American presidents in years.Now, with Joe Biden winning the election, how will the next U.S. president diverge from his predecessor, and where he might keep the status quo?Steel and AluminumThe biggest issues in steel and aluminum are very similar, given these two industries — especially steel — were a top priority for the Trump administration. Tariffs aren’t expected to go away any time soon under Biden, and market participants have adjusted for the 25% duty on steel imports and the 10% levy on aluminum.Removing them would be like catching a falling knife: It would alienate voters across the Midwest who helped Biden across the finish line. It would also lead U.S. Steel Corp. and Century Aluminum Co., among others, and the United Steelworkers union to lobby for some sort of new trade action to protect their industries.Biden is more likely to maintain the tariffs and work with key allies — including the European Union, Japan and Canada — to form a bloc opposing the subsidies China gives to its industries, which produce more than half of the world’s steel and aluminum. The Trump administration openly shunned multilateral trade partnerships, so this would be a big change in policy. It’s still unclear, though, what policies Biden would enact to further protect the industries, both of whom claim need more help.LNGTrump administration officials criss-crossed Europe and Asia in 2019 touting U.S. LNG exports as “freedom gas” and “molecules of U.S. freedom,” but trade wars hurt sales as did environmental concerns over flaring in the Permian Basin and other emissions associated with production and shipment.Biden didn’t state a position about LNG on his campaign website but boasts a plan to reduce methane emissions and flaring, which European buyers would welcome. Biden was vice president when the Obama administration approved permits for all six of the current LNG export terminals.Political observers believe that Biden would bring the U.S. back into the Paris Agreement, an environmental treaty between nearly 200 nations to reduce greenhouse gas pollution. With buyers across the globe seeking greener or carbon-neutral LNG cargoes, the move might benefit U.S. exporters.“Our biggest concern is American LNG exports to Asia and to Europe, and how those have declined as a consequence of some of these trade wars,” said Mike Sommers, the president of the American Petroleum Institute. As a previous longtime member of the Senate Foreign Relations Committee, Biden “has a firm understanding of how important American energy independence is from a foreign policy perspective as well,” he said.OilEnergy will likely be on the table in U.S. trade talks with China.“As long as U.S. energy production such as shale oil, LPG and natural gas exceeds domestic demand, America would be an exporter,” said Sandy Fielden, director of research for Morningstar Inc. “So China, as the world’s largest consumer, will use energy as a bargaining chip. A Biden administration would implement a measured trade policy without the Trump tit-for-tat noise.”“With a Biden victory, what you’re going to expect is a lot less trade uncertainty, and that is great for oil prices,” said Edward Moya, a senior market analyst at Oanda Corp. “We see the best demand when globalization is trending.”Despite ratcheting up sanctions on Venezuela’s state oil company, Trump wasn’t able to dislodge Nicolas Maduro. Analysts say that a Biden victory won’t necessarily reverse all the measures taken against Maduro.Biden will seek to re-enter the 2015 Iranian nuclear deal and lift sanctions on the country, according to RBC Capital Markets’ Helima Croft. “We continue to anticipate Iran being able to return around 1 million barrels a day of exports back to the market by the second half of 2021,” Croft said in a note.DairyU.S. officials have pushed for stricter Canadian enforcement of the terms of dairy trade outlined in the U.S.-Mexico-Canada Agreement, an area that could see fresh attention after the election. Only a small portion of U.S. cheese, dry milk and other dairy products crosses the border to Canadian markets. Still, many American dairies and processors have insisted that primarily their lower-value ingredients like powders are imported by Canada, while higher-value finished products like fine cheeses are largely barred. The U.S. and other large dairy producers around the globe have also criticized Canada’s below-market-priced exports as unfair competition.A Biden presidency may slow some progress the industry is pushing for as guidelines around trade between the U.S. and Canada cement through the end of the year. While dairy policy tends to capture bipartisan support, some market watchers are concerned that Biden’s team may not share the Trump administration’s skepticism of Canada’s dairy trade and pricing systems, potentially delaying or tempering efforts to change them.GrainsA Biden presidency could lead to warmer trade relations with China, supporting the rally in corn, wheat and soybeans, which hit a four-year high. He may roll back tariffs on Chinese goods, paving the way for more U.S. exports of agricultural products to Asia.Exports to China have surged, but that’s largely due to market forces that made America the best source of corn and soybeans. Many earlier this year speculated that China would wait until the election to question the phase-one trade deal or trigger a clause that allows the Asian nation not to fulfill its pledges due to the pandemic.Even with the surge in the second half of the year, shipments of agricultural and related products through September were about 38% of the deal target. The U.S. Trade Representative’s office said last month that 71% of the target has been reached.China is rebuilding its hog herd more quickly than expected after being hit by African swine fever, a deadly virus that kills most infected pigs within 10 days. The Asian nation has already purchased a record amount of American corn, and sales of soybeans are running at their highest level in data going back to 1991. U.S. pork exports are at a record and sorghum and beef sales also gained a boost.“China is implementing and purchasing under the phase one agreement,” Dave MacLennan, Cargill Inc.’s chief executive officer, said in a Bloomberg TV interview. But “most of the activity we believe is driven by pure economics, demand driven,” he said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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