INSIGHT: US infrastructure bill to boost spending on chemicals and plastics by $45.8bn

Author: Joseph Chang

2021/11/15

NEW YORK (ICIS)--The $1tr US infrastructure bill signed by President Joe Biden into law on Monday will boost spending on chemicals and plastics by around $45.8bn over the next decade, while also giving a boost to decarbonisation and clean hydrogen development.

“The infrastructure bill provides for higher spending on many traditional infrastructure projects - roads, bridges, ports, airports, etc. It also includes spending on a host of other projects and programs, including energy efficiency, R&D and environmental clean-up. Much of this spending will generate additional sales of chemical products,” said Kevin Swift, senior economist at ICIS.

“Federal spending on electric buses, for example, will generate chemistry sales in the form of plastic components, battery materials and chemistry, coatings, wire insulation, polyurethane (PU) foam seating, seat covers, styrene butadiene rubber (SBR) and other elastomers, and many specialty chemicals,” he added.

While the infrastructure bill provides funding through five years, from 2022-2026, the actual impact on spending will be drawn out further to around 10 years, noted the economist.

The additional spending of an average of around $4.6bn/year over 10 years will be lower at first and then ramp up in the mid-to-late years, providing a long-term tailwind for the US chemicals industry, Swift pointed out.

His analysis breaks down spending on chemicals and plastics by infrastructure category, and adjusts for non-physical spending such as engineering studies and program administration.

A number of programs also include cost-sharing elements such as grants and loans, so the amount of Federal spending is multiplied through additional funding from state and local governments, along with private sector sources.

US infrastructure bill impact
$bn
Total spending Chemicals and plastics
Broadband 65.0 11.1
Water Quality 55.0 9.7
Roads and Bridges 110.0 4.6
Electric Vehicles 12.5* 4.3
Climate 50.0 3.7
Public Transit 39.0 3.3
Rail 66.0 3.0
Environmental Clean-up 21.0 2.1
Ports and Airports 42.0 2.0
Other 2.0
   TOTAL 45.8
* EV spending includes $7.5bn for charging stations, and $5bn for electric/clean buses
Source: ICIS, US White House

BROADBAND DRIVES SPENDING
Perhaps surprisingly, Broadband is the leading category when it comes to generating the most additional spending on chemicals and plastics - an estimated $11.1bn.

This would come in the form of polymer wire and cable compounds - typically made from polyethylene (PE) - along with high-value electronic chemicals and materials such as for semiconductors needed to build out the infrastructure.

The bill provides $65bn to expand broadband access, particularly to rural communities.

WATER INFRASTRUCTURE
The second highest category is Water Quality with a projected additional $9.7bn in spending on chemicals and plastics. Here, this could include polyvinyl chloride (PVC) for pipes to replace lead pipes, along with water treatment chemicals and reverse osmosis (RO) membranes typically made from polyamide and polyester.

The bill allocates $55bn to expand access to clean drinking water for households, businesses, schools, and child care centres. It will essentially eliminate lead water pipes across the country.

Along with PVC, high density PE (HDPE) and crosslinked PE, copper is also commonly used for water pipes.

EV AND RECYCLING
Electric vehicles (EV) and the chemicals and plastics used to enable greater adoption will get a boost from $7.5bn in spending to build out EV charging stations across the country, along with $5bn to replacing thousands of buses with zero emission and “clean” buses, according to the bill.

Plastics recycling will also get a lift from $275m in funding for a recycling infrastructure grant program created by the Save Our Seas 2.0 Act, along with $75m to increase consumer education and participation in the recycling system, noted the Plastics Industry Association (PLASTICS).

CARBON CAPTURE AND HYDROGEN
The US infrastructure bill also includes provisions for carbon capture and storage (CCS), and clean hydrogen.

For CCS, this will include $3.5bn in funding for the “development of new or expanded commercial large-scale carbon sequestration projects and associated carbon dioxide (CO2) transport infrastructure, including funding for the feasibility, site characterisation, permitting, and construction stages of project development”.

In the bill, the US will establish a clean hydrogen strategy and roadmap, and invest $500m for R&D and projects such as establishing regional clean hydrogen hubs to accelerate production. It will also allocate $1.0bn to a clean hydrogen electrolysis program with the goal of reducing the cost of hydrogen produced to less than $2/kilogram (kg) by 2026.

Insight article by Joseph Chang

Thumbnail image shows a construction site. Photo by Shutterstock.