President's Stimulus Bill: Will it Help the Chemical Industry?
Huge piles of money will be going to revitalize the American economy. Will the construction chemical industry get some?
THE SHOCKWAVES of the global economic crisis just keep spreading: In early February, the US Department of Commerce reported that domestic construction spending dropped by 5.1% in 2008, the most since it began keeping records of this in 1993. Applications for building permits, meanwhile, dropped 4.8% last year.
According to the American Chemistry Council (ACC), chemistry makes up about $17,000 of each home built.
Many are hoping that The American Recovery and Reinvestment Act of 2009, signed by President Barack Obama on February 17, will give the US economy, especially various construction segments, a shot in the arm.
And companies that produce or supply construction or building-related chemicals and materials are hopeful that this stimulus bill will aid in their recoveries.
In early February, during an earnings conference, US-based Dow Chemical chairman and CEO Andrew Liveris specifically noted how the massive slowdown in the global housing market was impacting demand for the company's chlorine, used to make polyvinyl chloride (PVC) and polyurethanes (PU). The housing market is a primary end user for these products.
On that conference call, Liveris expressed hope that the Obama stimulus plan would create demand for construction-related chemicals.
Also in early February, ACC president and CEO Cal Dooley stressed the need for the bill, saying, "Our largest markets, building construction and vehicle production, are nearly at a standstill."
As an example, Dooley noted: "Two of our members recently had to endure the loss of a combined 17,500 employees and contractors. Those losses ripple through the economy. Each chemical industry job supports nearly seven other jobs in our supply chain, among service providers, and in the communities where we operate."
The ACC expects government investment in energy efficiency and renewable energy programs to create considerable demand for high-value materials produced by the chemical industry.
"Creating demand for those materials will help sustain and support the livelihoods of the more than 5m Americans who are part of the US chemical enterprise," it said.
The ACC is also quite bullish on any policies which would increase US energy capacity and conservation.
"Some qualifying technologies are 'shovel-ready' and ideally suit the president's objective to support investments that create jobs, improve energy security and reduce greenhouse gas emissions," it said.
Several advanced gasification technology projects are cited by the ACC as ready to go, and among its provisions, the American Recovery and Reinvestment Act includes $3.4bn (€2.7bn) for carbon capture and sequestration demonstration projects.
CONSTRUCTION CHEMICALS RECOVERY
The stimulus package will provide a boon to producers of construction chemicals, potentially increasing demand up to 8%, says a BASF executive.
Out of the $787bn scheduled for the Act, the amount dedicated to transportation infrastructure is roughly $64bn. The Act includes rail, air, ports as well as water infrastructure in its definition of transportation infrastructure.
Germany-based chemical major BASF estimates that about 2% of the money earmarked for repair and rebuilding will end up being spent on chemicals.
Jack Armstrong, leader of BASF's construction markets for North America, sees the largest-volume components of infrastructure work to be asphalt, cement, aggregate, grout, steel and coatings.
"Consequently, chemical admixtures, super-plasticizers and other ingredients such as latex that allow concrete to be pumped easily, remain workable as needed, and provide greater flexibility, respectively, will see large demand increase," about 6-8%, says Armstrong.
About 90% of the roads and streets in the US are paved with asphalt, while 100% of US bridges are paved with concrete. Both are enhanced through use of chemical additives, in particular latex, notes Armstrong.
"Another area where chemicals will be needed is for pervious or porous paving that can help aquifers to recharge, reduce loads on storm water collection systems and reduce land needed for storm water management," he says. "By using chemicals, concrete, asphalt and decorative stone can be made to meet all functional construction requirements for paving and drain water."
The president's economic stimulus package also includes water infrastructure improvement projects. "Water transmission is thought to be a big area of need for upgrade," says Armstrong, noting that lining old pipes with plastic systems as well as outright replacements will also increase chemical demand.
"In an industry where time is money, chemicals will speed up project completion times," notes the BASF executive. "Admixture systems already allow overnight road reconstruction with little hassle to motorists, [and] this will lead to much less pollution due to idling cars stuck in traffic due to roadwork."
One area where BASF expects to see more chemicals used to enhance performance of construction projects is sound abatement.
"Historically, large concrete or wood structures have been used to reduce sound in neighborhoods along roads and rail systems," says Armstrong, but BASF's "BASOTECT melamine foam can be used instead to do the job, hold up to the elements, go up faster and reduce costs."
He notes that other areas of increased chemical use in construction include: greater use of reflective surfaces for concrete and asphalt to help reduce the heat island effect in cities and the greater use of porous paving to reduce the need for storm water management systems and reduce loads on existing storm water systems.
US-based DuPont, meanwhile, believes it is now in a better position to help the US than it was seven to 10 years ago. That was when the company redirected its R&D pipeline and resources to what it felt was more sustainable products and solution, like bio-based fuels and plastics.
"We believe as America moves to a more sustainable economy, DuPont can provide those solutions," says Anthony Farina, a company spokesman.
DuPont has an application where Kevlar is used to strengthen the coatings on bridges and for asphalt, the company has developed its Elvaloy asphalt modifier that increases the durability of the pavement: "So roads do not have to be replaced every 10 years," says Farina.
NOT SO FAST, PAL
Others, however, are not as sanguine. Dmitry Silversteyn, senior research analyst at Longbow Research, feels Obama's stimulus package is not going to generate sufficient incremental demand for construction chemicals in 2009 to allow for positive comparisons.
Many were hoping that the president's recently signed stimulus bill would have substantial earmarks for US infrastructure repair, which would in turn lead to a boost in construction chemical demand.
But "the package was not as big as previously discussed, and the proportion of it that goes toward infrastructure is not as big as was previously thought," says Silversteyn.
And even within the infrastructure spending, there is still uncertainty on whether it will be spent on heavy infrastructure needs or lighter ones. Heavy infrastructure describes, among others, the construction of new bridges and highways, refineries, coal plants and nuclear power plants. "None of that was in the bill," says Silversteyn.
Light infrastructure needs include commuter rail, bridge and road repair, as well as the construction of smaller municipal buildings. "These don't generate as much demand for as many different products as does a heavier project," notes the analyst.
Much depends, though, on when the earmarked monies get spent. Silversteyn commented that if 20% of the stimulus package is spent in 2009, 50% in 2010, and the rest in 2011, then the tail end of 2010 will, if base level demand is stable, have a positive impact on volumes.
For 2010, construction chemicals and related materials will have 3-5% growth. "If the bulk of 2010's money is spent towards the beginning of the year, volume growth will be more like 4-5%," said Silversteyn.
From the stimulus bill, projects that will be using construction chemicals include: $27.5bn for highway and bridge construction projects $8.4bn for mass transit and public transportation projects $8bn for high-speed rail projects, $1.3bn for aviation projects and $4.6bn for water infrastructure projects.
THE SHOCKWAVES of the global economic crisis just keep spreading: In early February, the US Department of Commerce reported that domestic construction spending dropped by 5.1% in 2008, the most since it began keeping records of this in 1993. Applications for building permits, meanwhile, dropped 4.8% last year.
According to the American Chemistry Council (ACC), chemistry makes up about $17,000 of each home built.
Many are hoping that The American Recovery and Reinvestment Act of 2009, signed by President Barack Obama on February 17, will give the US economy, especially various construction segments, a shot in the arm.
And companies that produce or supply construction or building-related chemicals and materials are hopeful that this stimulus bill will aid in their recoveries.
In early February, during an earnings conference, US-based Dow Chemical chairman and CEO Andrew Liveris specifically noted how the massive slowdown in the global housing market was impacting demand for the company's chlorine, used to make polyvinyl chloride (PVC) and polyurethanes (PU). The housing market is a primary end user for these products.
On that conference call, Liveris expressed hope that the Obama stimulus plan would create demand for construction-related chemicals.
Also in early February, ACC president and CEO Cal Dooley stressed the need for the bill, saying, "Our largest markets, building construction and vehicle production, are nearly at a standstill."
As an example, Dooley noted: "Two of our members recently had to endure the loss of a combined 17,500 employees and contractors. Those losses ripple through the economy. Each chemical industry job supports nearly seven other jobs in our supply chain, among service providers, and in the communities where we operate."
The ACC expects government investment in energy efficiency and renewable energy programs to create considerable demand for high-value materials produced by the chemical industry.
"Creating demand for those materials will help sustain and support the livelihoods of the more than 5m Americans who are part of the US chemical enterprise," it said.
The ACC is also quite bullish on any policies which would increase US energy capacity and conservation.
"Some qualifying technologies are 'shovel-ready' and ideally suit the president's objective to support investments that create jobs, improve energy security and reduce greenhouse gas emissions," it said.
Several advanced gasification technology projects are cited by the ACC as ready to go, and among its provisions, the American Recovery and Reinvestment Act includes $3.4bn (€2.7bn) for carbon capture and sequestration demonstration projects.
CONSTRUCTION CHEMICALS RECOVERY
The stimulus package will provide a boon to producers of construction chemicals, potentially increasing demand up to 8%, says a BASF executive.
Out of the $787bn scheduled for the Act, the amount dedicated to transportation infrastructure is roughly $64bn. The Act includes rail, air, ports as well as water infrastructure in its definition of transportation infrastructure.
Germany-based chemical major BASF estimates that about 2% of the money earmarked for repair and rebuilding will end up being spent on chemicals.
Jack Armstrong, leader of BASF's construction markets for North America, sees the largest-volume components of infrastructure work to be asphalt, cement, aggregate, grout, steel and coatings.
"Consequently, chemical admixtures, super-plasticizers and other ingredients such as latex that allow concrete to be pumped easily, remain workable as needed, and provide greater flexibility, respectively, will see large demand increase," about 6-8%, says Armstrong.
About 90% of the roads and streets in the US are paved with asphalt, while 100% of US bridges are paved with concrete. Both are enhanced through use of chemical additives, in particular latex, notes Armstrong.
"Another area where chemicals will be needed is for pervious or porous paving that can help aquifers to recharge, reduce loads on storm water collection systems and reduce land needed for storm water management," he says. "By using chemicals, concrete, asphalt and decorative stone can be made to meet all functional construction requirements for paving and drain water."
The president's economic stimulus package also includes water infrastructure improvement projects. "Water transmission is thought to be a big area of need for upgrade," says Armstrong, noting that lining old pipes with plastic systems as well as outright replacements will also increase chemical demand.
"In an industry where time is money, chemicals will speed up project completion times," notes the BASF executive. "Admixture systems already allow overnight road reconstruction with little hassle to motorists, [and] this will lead to much less pollution due to idling cars stuck in traffic due to roadwork."
One area where BASF expects to see more chemicals used to enhance performance of construction projects is sound abatement.
"Historically, large concrete or wood structures have been used to reduce sound in neighborhoods along roads and rail systems," says Armstrong, but BASF's "BASOTECT melamine foam can be used instead to do the job, hold up to the elements, go up faster and reduce costs."
He notes that other areas of increased chemical use in construction include: greater use of reflective surfaces for concrete and asphalt to help reduce the heat island effect in cities and the greater use of porous paving to reduce the need for storm water management systems and reduce loads on existing storm water systems.
US-based DuPont, meanwhile, believes it is now in a better position to help the US than it was seven to 10 years ago. That was when the company redirected its R&D pipeline and resources to what it felt was more sustainable products and solution, like bio-based fuels and plastics.
"We believe as America moves to a more sustainable economy, DuPont can provide those solutions," says Anthony Farina, a company spokesman.
DuPont has an application where Kevlar is used to strengthen the coatings on bridges and for asphalt, the company has developed its Elvaloy asphalt modifier that increases the durability of the pavement: "So roads do not have to be replaced every 10 years," says Farina.
NOT SO FAST, PAL
Others, however, are not as sanguine. Dmitry Silversteyn, senior research analyst at Longbow Research, feels Obama's stimulus package is not going to generate sufficient incremental demand for construction chemicals in 2009 to allow for positive comparisons.
Many were hoping that the president's recently signed stimulus bill would have substantial earmarks for US infrastructure repair, which would in turn lead to a boost in construction chemical demand.
But "the package was not as big as previously discussed, and the proportion of it that goes toward infrastructure is not as big as was previously thought," says Silversteyn.
And even within the infrastructure spending, there is still uncertainty on whether it will be spent on heavy infrastructure needs or lighter ones. Heavy infrastructure describes, among others, the construction of new bridges and highways, refineries, coal plants and nuclear power plants. "None of that was in the bill," says Silversteyn.
Light infrastructure needs include commuter rail, bridge and road repair, as well as the construction of smaller municipal buildings. "These don't generate as much demand for as many different products as does a heavier project," notes the analyst.
Much depends, though, on when the earmarked monies get spent. Silversteyn commented that if 20% of the stimulus package is spent in 2009, 50% in 2010, and the rest in 2011, then the tail end of 2010 will, if base level demand is stable, have a positive impact on volumes.
For 2010, construction chemicals and related materials will have 3-5% growth. "If the bulk of 2010's money is spent towards the beginning of the year, volume growth will be more like 4-5%," said Silversteyn.
From the stimulus bill, projects that will be using construction chemicals include: $27.5bn for highway and bridge construction projects $8.4bn for mass transit and public transportation projects $8bn for high-speed rail projects, $1.3bn for aviation projects and $4.6bn for water infrastructure projects.
quoted from: www.ICIS.com
