Biden's $2 trillion infrastructure plan: How many cups can the chemical industry share?

Recently, U.S. President Biden announced an infrastructure construction plan of more than 2 trillion U.S. dollars (13 trillion yuan) in Pittsburgh, an important industrial city in the United States. If the plan is implemented, it will undoubtedly require a large amount of chemical products, injecting huge opportunities for the chemical industry.

U.S. chemical industry supports infrastructure plans

The American Chemistry Council (ACC) is a long-term supporter of the comprehensive infrastructure package. ACC said that the plan will upgrade the U.S. transportation and energy network, which can help support the chemical manufacturing industry.

ACC emphasized that the US chemical industry will also be the focus of this plan because it will provide advanced materials and technologies. In 2020, the chemical industry will invest more than US$10 billion in research and development, surpassing leading industries such as electronics, automobiles and healthcare.

"Solving the increasingly serious infrastructure problems in the United States is particularly important for the US chemical industry. Because efficient transportation networks and strong energy infrastructure are vital to chemical manufacturing and the ability of the industry to innovate and create high-paying jobs." ACC President Chris Jahn, chief executive officer, stated that the United States needs a modern and resilient energy network that communities can rely on and enable chemical manufacturers to maintain a stable power supply at all times. In order to support new construction projects and the US manufacturing industry, environmental reviews and approval decisions are also required through modern processes.

 However, the plan includes changes to the tax law, including raising the corporate tax rate from the current 21% to 28%, eliminating the company’s global minimum tax rate loophole, and eliminating tax incentives in the fossil fuel industry.

For companies, this part is the most controversial, and many industry associations have expressed concerns about it.

"We do have serious concerns about the tax regulations in the proposed plan, which will make the United States less competitive, stifle innovation and disrupt our investment, innovation, job creation, and are critical to improving infrastructure, clean energy and climate. Technology capabilities and solutions,” said ACC CEO Chris Jahn.

The National Association of Manufacturers (NAM), the American Associated General Contractor (AGC) and the American Petroleum Institute (API) also opposed the proposed tax change.

Infrastructure plan will stimulate chemical demand

The economic plan that Biden called the "U.S. Employment Program" includes the allocation of US$621 billion for transportation infrastructure construction, US$400 billion for improving care services for the elderly, the weak, and the disabled, US$300 billion for promoting the development of manufacturing, and US$100 million will be used for the construction of digital infrastructure, and other funds will be invested in areas such as housing improvement, school facilities renewal, and labor skills training.

The Jefferies research report stated: "The scale of the proposed U.S. infrastructure package is larger than expected... The growth expectations for 2022-2023 may rise, which should be upstream Chemicals provide support."

With a huge amount of US$2 trillion, how many cups can the chemical industry get?

One, 621 billion US dollars: used to repair and modernize bridges, highways and highways; expand and modernize the public transportation system; invest in electric vehicles; improve the railway system; improve ports, water transportation and airports.

Road and highway construction will increase the demand for concrete and asphalt additives, including polyethylene glycol (PEG) for curing agents; and other chemicals used for sealants, such as epoxy and acrylic; methacrylic acid Methyl esters (MMA) and titanium dioxide will be used for road markings; repairing bridges requires not only steel, but also industrial coatings.

Automotive polymers mainly include nylon, polyurethane (PU), polypropylene (PP), ABS/SAN, and polycarbonate (PC). According to data from ICIS Analytics, on a global scale, automobiles account for 32% of nylon demand, 20% of PU demand, 15% of PC demand, 12% of ABS/SAN demand and 8% of PP demand.

 Two, 111 billion U.S. dollars: Replace (including) lead water pipes and optimize existing tap water supply lines to ensure drinking water safety and upgrade tap water infrastructure.

The plan includes a $45 billion replacement of 100% of lead pipes in drinking water systems to eliminate lead exposure in homes and schools. Typical lead pipe substitutes include copper, galvanized steel, and polyvinyl chloride (PVC).

Three, 100 billion US dollars: used to expand high-speed network connections.

For chemicals, this will increase the demand for wire and cable polymers.

According to relevant data, in North America, wires and cables account for 2% of the demand for high-density PE (HDPE) and linear low-density PE (LLDPE), and more than 5% of the demand for low-density PE (LDPE).

4. US$213 billion: Renewal of residential and commercial buildings

 New buildings and renovations of old buildings will make buildings more energy-efficient, which will increase the demand for key building polymers such as PVC, PU, expandable polystyrene (EPS) and polymethyl methacrylate (PMMA).

According to ICIS Analytics data, global construction applications account for 68% of PVC demand, 51% of EPS demand, 30% of PU demand and 28% of PMMA demand.