USD 2 trillion infrastructure plan would light a fire under chemicals demand

By Joseph Chang, Global Editor, ICIS Chemical Business

illustration: ICIS
illustration: ICIS

The proposed USD 2 trillion infrastructure plan would massively boost spending to build and upgrade the country’s transportation, housing, automotive and communications systems, giving a further boost to chemicals and polymers as critical building blocks.

Branded as The American Jobs Plan, the infrastructure bill includes USD 621 billion for transportation, including roads, bridges, public transit, airports, ports and electric vehicle (EV) infrastructure; over USD 300 billion in drinking water systems, electric grids and broadband access; and over USD 300 billion in affordable housing, schools, hospitals and office buildings.

This “hard infrastructure” portion amounts to over USD 1.2 trillion, with other funds targeting research and development and job training.

The US chemical industry “will be at the centre of this effort since it will provide advanced materials and techniques to make many of these upgrades possible,” said the American Chemistry Council (ACC) in a statement.

There is no question an investment in US infrastructure on a magnitude not seen since World War II would require massive volumes of chemicals.

However, the plan which includes corporate tax hikes, is likely to involve months of negotiations in Congress.

Highways, vehicles and water pipes
Specifically on transportation infrastructure, the plan would modernise 20,000 miles of highways, roads and streets, fix the 10 most economically important bridges in need of repair, repair 10,000 smaller bridges, replace thousands of buses and rail cars, renew airports and expand transit and rail lines.

Highway and road construction would boost demand for concrete and asphalt additives including polyethylene glycol (PEG) for curing agents, and other chemicals such as epoxy resins and acrylics for sealants. Methyl methacrylate (MMA) and titanium dioxide (TiO2) would be used for road markings. Repairing bridges not only requires steel, but industrial coatings as well.

On the automotive side, USD 174 billion is earmarked for investment in the EV market, to “enable automakers to spur domestic supply chains from raw materials to parts, retool factories to compete globally, and support American workers to make batteries and EVs.” This will include tax incentives to buy US-made EVs.

For the acceleration of the EV transition, the plan includes grants and incentives to build a network of 500,000 EV chargers by 2030, replace 50,000 diesel transit vehicles and electrify at least 20% of the yellow school bus fleet.

Public transportation will also get a massive upgrade, including a renewal of the bus fleet.

An investment of USD 85 billion would be made to modernise existing transit and expand systems to meet rider demand. The US Department of Transportation estimates a repair backlog of over USD 105 million, representing 24,000 buses, 5,000 rail cars, 200 stations and thousands of miles of track, signals and power systems in need of replacement, according to the plan.

Polymer demand by end use – Automotive (source: ICIS Analytics)
Polymer demand by end use – Automotive (source: ICIS Analytics)

Major polymers used in automotive include nylon, polyurethanes (PU), polypropylene (PP), ABS/SAN and polycarbonate (PC). Most significantly, automotive accounts for 32% of nylon, 20% of PU, 15% of PC, 12% of ABS/SAN and 8% of PP demand on a global basis, according to ICIS Analytics.

On water infrastructure, the plan includes spending USD 45 billion to replace 100% of lead pipes in drinking water systems to eliminate lead exposure in homes and schools. Typical lead pipe replacements include copper, galvanised steel and polyvinyl chloride (PVC).

The lead pipe replacement is part of a USD 111 billion investment to modernise water systems which includes remediation of PFAS (per- and polyfluoroalkyl substances) contamination in drinking water.

Residential and commercial buildings renewal
The construction and modernising of homes and buildings is a big part of the infrastructure plan which calls for USD 213 billion to build, preserve and retrofit over 2 million affordable housing units, USD 100 billion to upgrade and build new schools, and tens of billions more for community college buildings, child-care facilities, veterans’ hospitals.

Polymer demand by end use – Construction (source: ICIS Analytics)
Polymer demand by end use – Construction (source: ICIS Analytics)

The new construction and retrofits will involve making the buildings more energy efficient.

This will ramp up demand for key construction polymers such as PVC, PU, expandable polystyrene (EPS) and polymethyl methacrylate (PMMA). Most significantly, construction applications account for 68% of PVC, 51% of EPS, 30% of PU, and 28% of PMMA on a global basis, according to ICIS Analytics.

Broadband access
Access to high-speed broadband internet and mobile connections will be widely expanded with a USD 100 billion investment, including to the more than 35% rural Americans who lack access to this at minimally acceptable speeds, according to the plan.

For chemicals, this will boost demand for wire and cable compounds – those used for jacketing the wires and fibre optic lines that enable high-speed broadband connections.

Dow produces a range of telecom cable compounds made from different grades of polyethylene (PE) to help deliver broadband access. These compounds cover and protect copper and fibre optic cables.

Clean energy demonstration projects
Large-scale solar and wind projects are not specifically mentioned in the plan, other than wind in demonstration projects.

An overall USD 35 billion investment to facilitate breakthroughs in clean energy includes USD 15 billion to build demonstration projects for climate R&D in energy storage, carbon capture and storage (CCS), hydrogen, advanced nuclear, rare earth element separations, floating offshore wind, biofuels/bioproducts, quantum computing and EVs.

Meanwhile, USD 100 billion would be allocated to strengthening power infrastructure, including upgrading the electric grid and extending tax credits for clean energy generation and storage.

The plan also calls for a USD 46 billion investment in federal buying power to specifically jump-start clean energy manufacturing via procurement. This would enable the local manufacturing of EVs, ports, pumps, clean materials and advanced nuclear reactors and fuel needed to achieve net-zero emissions by 2050.

…And changes to tax code
Lastly, the plan includes multiple changes to the tax code, including raising the corporate tax rate to 28% from the current 21%, closing corporate global minimum tax loopholes, implementing tax changes to discourage offshoring and eliminating tax breaks for the fossil fuels industry.

This part is the most controversial for business, with a number of trade associations expressing concerns.

“We do have grave concerns with tax provisions in the proposed plan that would make America less competitive, stifle innovation and interfere with our ability to invest, innovate, create jobs, and provide technologies that will be critical to infrastructure improvement, clean energy and climate solutions,” said ACC CEO Chris Jahn.

“Raising taxes on manufacturers would fundamentally undermine our ability to lead this recovery. Our industry fought for decades to achieve a tax system that includes competitive rates and modern international tax provisions,” said Jay Timmons, CEO of the National Association of Manufacturers (NAM).

Other trade groups such as the Associated General Contractors of America (AGC) and the American Petroleum Institute (API) also objected to the proposed tax changes.

Joseph Chang is Global Editor of ICIS Chemical Business, a weekly publication focusing on macro trends and the analysis of drivers of chemical prices worldwide. This includes price trends, and the factors impacting these trends in both the short term, and long term.
Additional contribution by Rhian O’Connor, Adam Yanelli and Janet Miranda.