Supply Chains and Plastics

Hey Influence Traders,

President Biden pitched his infrastructure bill again yesterday.

He promoted his $2.25 trillion proposal by arguing that it is urgent to keep the U.S. competitive against China.

Some soundbites included:

        • “It’s a once-in-a generation investment in America.”
        • “It is the single largest investment in American jobs since World War II.”
        • “China and the rest of the world” are “attempting to own the future — the technology, quantum computing.”

Green Infrastructure

The Biden infrastructure plan will be heavily focused on promoting green energy. That will most certainly include green infrastructure plans to build more wind turbines.

And wind turbines require tons of plastic.

Literally!

I’ve noted before that it takes 900 tons of steel to build just one wind turbine.

It also takes about 2,500 tons of concrete and 45 tons of nonrecyclable plastic.

And what does plastic require – polyethylene (PE), polypropylene (PP) and monoethylene (MEG).

A standard 5-megawatt turbine has three 60-meter-long blades, each weighing 15 metric tons. Much of the material for the blades is made from ethylene.

Supply Chain Challenges

Ripples that have recently collided are working to disrupt many of the world’s supply chains.

The Wall Street Journal went with this dour headline: “Everywhere You Look, the Global Supply Chain Is a Mess.”

It’s spot on.

For years now, China has been reaping the benefits of controlling a good number of supply chains, from semiconductors to rare earth.

The pandemic, severe winter weather in some parts of the world and the recent blockage of the Suez Canal by a container ship longer than the Empire State Building is tall have compounded those problems.

We’ve seen a lot of headline news about the supply chain disruptions having led to a global shortage of semiconductors.

In addition, recent supply chain disruptions of PE, PP,and MEG have caused issues in the production of plastics:

        • Covid-19-related lockdowns have caused inventory levels to fall
        • Covid-19 shutdowns caused production to slow and created shipping disruptions
        • In August, Hurricane Laura forced petrochemical factories in Louisiana and Texas to shut down
        • The winter storm in February that hit Texas shuttered some of the largest petrochemical companies
        • The container ship blocked the Suez Canal

The disruption of these raw materials is leading to factory shutdowns, sharp price increases and production delays.

This will have an impact as the Biden administration rolls out its infrastructure plan because plastics are critical to both traditional and green building materials, particularly the construction of wind turbine blades.

Plastics Companies

There are a number of great plastics manufacturers, such as Chevron Corp (Ticker: CVX).

General Electric (Ticker: GE) and Siemens (Ticker: SIEGY) are two of the biggest producers of wind turbine blades.

But there are also some smaller names to keep an eye on.

One of those names is LyondellBasell Industries (Ticker: LYB).

LYB is the largest licensor of polyethylene and polypropylene technologies. It also produces ethylene, propylene, polyolefins and oxyfuels.

It recently expanded its polyethylene capacity with a new plant in Texas

All of these companies could benefit from green infrastructure spending.

Cutting Through the Noise for You.


Frank

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