The us chemical industry has mixed feelings about the passage of a trillion-dollar infrastructure bill
2021-08-17
The US Senate passed a bipartisan infrastructure investment bill worth about $1 trillion on Monday. As major U.S. stock indexes climbed to new highs on Tuesday, the industrial, materials and energy sectors performed well, and oil prices rebounded strongly, the chemical industry reacted with mixed feelings.
What does $1 trillion mean?
The U.S. Senate passed the "Infrastructure Investment and Jobs Act" by a vote of 69 to 30. The bill includes funding for existing federal public works projects, along with about $550 billion in new investments over five years to build roads, Bridges and other transportation infrastructure, and upgrade water systems, the electric grid and broadband networks.
After months of negotiations, the White House and senate representatives from both parties reached a tentative agreement on the roughly $1 trillion infrastructure investment plan in late June, with final details hammered out in early August. The amount is far less than the $2.25 trillion infrastructure investment plan proposed by U.S. President Joe Biden earlier this year.
The biggest highlight of the bill, which has been under negotiation for months, is a $550 billion increase in infrastructure spending, in addition to a reauthorization of existing federal public works spending.
$110 billion to build roads and Bridges;
$66 billion to build railways;
$39.2 billion for public transportation;
$65 billion to invest in broadband infrastructure and give low-income families $30 a month vouchers for Internet service;
$17.3 billion for ports and waterways;
$55 billion for clean water, including funds to address CFCS and PFAS;
$73 billion to renovate the power grid.
In addition, the bill includes investments in clean and renewable energy. For example, $3.5 billion for four direct Air Capture (DAC) industrial centers; $8 billion to invest in clean energy, including at least four regional clean hydrogen centers; $2.5 billion for carbon capture and demonstration projects, among others.
What was the reaction?
On Tuesday, the three major U.S. stock indexes closed mixed, with the Dow and S&P 500 hitting intraday and closing record highs, up 0.46% and 0.10%, respectively. Energy stocks generally rebounded, with Shares of Exxon Mobil and Chevron both up nearly 2%.
Oil prices staged a strong rebound on Tuesday after falling sharply on Monday. By the end of the day, light crude for September delivery was up $1.81, or 2.72%, at $68.29 a barrel on the New York Mercantile Exchange. London Brent crude for October delivery rose $1.59, or 2.30%, to settle at $70.63 a barrel. The rise in oil prices was driven by the senate's latest infrastructure bill, which boosted investors' confidence in future demand for crude.
The American Petroleum Institute (API) said it supports key initiatives in the infrastructure bill.
"We are encouraged that [the infrastructure bill] recognizes the importance of energy infrastructure to American families and businesses," the API said in a statement. Specifically, this agreement contains key support for the development of innovative technologies, such as carbon capture and hydrogen, advances that will help combat climate change."
The American Chemistry Council (ACC) welcomed the senate's passage of the infrastructure bill, adding that it would stimulate the development of advanced materials that rely on chemistry. But the ACC remains "seriously concerned" about the bill's decision to reinstate the superfund tax on 42 products.
The chemical industry produces many products used in infrastructure and vehicle manufacturing, especially electric vehicles that often require lightweight materials such as plastics. According to an ACC report, the amount of plastic polymer used in light-duty vehicles has increased from less than 20 pounds (9 kilograms) per vehicle in 1960 to more than 400 pounds per vehicle in 2020. In addition, light vehicles will use 243 pounds of rubber, 49 pounds of rayon and 33 pounds of paint in 2020. So the bill will be a big boon to the chemical industry.
However, the ACC believes that the US's global manufacturing competitiveness will be threatened by the superfund's new excise tax on 42 chemicals, key minerals and metallic elements, with consumers paying higher prices for a variety of goods, including some needed for infrastructure development and climate improvement. It comes at a time when Americans are already struggling with soaring inflation and rising prices. The chemical industry has been a driver of investment and job creation in the United States over the past decade.
Reinstating the superfund tax on chemical producers is estimated to cost $13 billion.
The ACC warns: "If implemented, these new taxes will reduce the country's competitive advantage. Congress must refrain from pursuing any additional taxes that would hurt the American chemical industry."
The American Association of Associated Contractors (AGC) said in a statement that the investment will increase demand for construction services and materials. It urged the House to pass the bill as soon as possible.
However, its fate in the House remains uncertain. House Speaker Nancy Pelosi has said she wants the house to consider the infrastructure investment bill and a separate $3.5 trillion spending bill together after the Senate passes them.
