Higher prices and product shortages are a common refrain for consumers and businesses across the country.
Some of the inflationary and supply chain impacts are being felt underground – literally.
Shortages and higher prices of PVC pipes and other conduits as well as key building materials and components threaten to delay and dramatically increase the costs of repairing aging sewage and water systems and extending the broadband Internet networks and data centers in rural and underserved areas.
These underground efforts are two of the top priorities of the Biden administration as well as state and local governments for infrastructure spending under the US $2.3 trillion bailout law and proposed $1 trillion infrastructure bill passed by Congress last year.
PVC and high-density polyethylene (HDPE) piping systems are used by municipal and other water systems nationwide. These pipes can also be used to carry high-speed Internet fiber.
Although there are alternatives to PVC pipe, petroleum-based pipe is cheaper and easier to produce. But like other petroleum products (including plastics), PVC pipe is linked to rising oil prices, supply chain issues, and rising demand from a housing market. robust and expanding government infrastructure spending.
Impacts on several shores
Rick Van Emburgh, municipal engineer for the town of Easton on Maryland’s east coast, said he’s seen the price of PVC pipe systems and materials such as asphalt quadruple, inflation impacting the city’s infrastructure projects.
“There is a backlog of material supplies,” Van Emburgh said. “The supply takes months to arrive.”
As in other jurisdictions, these types of pricing and logistical issues can impact infrastructure priorities and spending under federal spending programs.
Easton, for example, is primarily focusing its $16.5 million on improving water supply systems, according to City Manager Don Richardson.
These projects include the installation of new, larger storm drains in the historic town which was established in 1710.
Procurement officials should incorporate certain pricing provisions to account for potential large cost increases to incentivize bidders.
On Florida’s southwest Gulf Coast, Linda Senne, chief financial officer for the City of Venice, said issues of higher prices and delays for PVC pipe as well as labor shortages for contractors are the main stumbling blocks for infrastructure construction projects.
Senne said petroleum-related products, including plastic components and piping systems, are experiencing significant price swings with oil and gasoline prices rising significantly. Crude oil prices were trading in the $112 per barrel range on Friday, May 20, from $66 per barrel a year ago.
Rising oil prices and tight supplies due to U.S. and NATO sanctions on Russian energy exports following the invasion of Ukraine led to record gasoline and diesel prices in Oregon , in California and nationwide.
These are impacting the logistics costs of infrastructure and construction projects and putting upward pressure on plastics, piping systems and other petroleum-based products.
“Plastics will become more expensive to produce,” said Vincent Smith, an economics professor at Montana State University who specializes in agriculture and supply chains.
The piping industry – which primarily focuses on water infrastructure projects – is valued at $30 billion worldwide, according to Market Research Future. Current market dynamics benefit the sector – a scenario playing out across all supply chains.
Houston-based Westlake Corp., a leading supplier of PVC and materials, posted record quarterly sales of $4.1 billion and profits of $756 million in the first three months of 2022. Profits rose by 212% and sales increased by 72% compared to a year ago.
Smith of the state of Montana said that if farmers also use pipe systems for irrigation and other systems, they face bigger price hikes for fertilizers after U.S. sanctions kicked in. banned imports of products and minerals from Russia and Belarus following the invasion of Ukraine.
These two countries supply a significant share of fertilizer components and products in the world.
Nail guns, data centers, elevator parts
Ken Simonson, chief economist for Associated General Contractors of America, based in Virginia, said he had heard of problems with piping systems in Wyoming and that there were supply chain problems caused by factories shut down by extremely cold weather in Texas and hurricanes in Louisiana last year.
Simonson said shipping delays and higher prices and their impacts on construction projects extend to other materials.
“There’s just a whole host of things missing,” said Simonson, whose group represents the construction industry. “The situation is not improving.
These are impacting construction contractors, engineering firms and other builders across the country. The shortages and price hikes are for power-generating equipment and machinery critical to the development of Internet data centers.
Simonson also said a contractor in North Carolina told him about problems accessing powder guns.
“They had to scramble to find it,” he said, adding how many construction projects can be affected by such shortages.
“All sorts of things are holding up construction,” he said, pointing to elevator parts that suddenly became scarce during Italy’s COVID surge. “The supply chain is very fragile.”
Smith said not all supply chain disruptions or delays are COVID-related (including recent government shutdowns of major port factories and production centers in China).
“That’s not accurate,” he said, pointing to problems with infant formula, which stem from domestic production issues.
He said some sectors, including the auto industry which has seen computer chip shortages and steep price increases over the past two years, are embracing tighter inventories.
Government spending on infrastructure as well as strong housing markets during the pandemic have also boosted demand for construction materials and equipment. This increased demand has put additional upward pressure on prices and pressure on inventories.
On the broadband front, President Joe Biden, state and local governments have made improving internet access in rural and low-income communities a priority.
The White House’s $14.2 billion effort includes subsidizing low-cost internet services with private providers. Costs would range between $30 and $40 a month for about 48 million low-income Americans, including those on public assistance programs.
“Broadband is to the 21st century what electricity was to the 20th century – essential,” said U.S. Senator Raphael Warnock, D-Georgia, in support of Biden’s low-cost plan and the $570 million his State received ARPA infrastructure money.
Megan Cook, council president of Easton, Maryland, said bridging the digital divide has become more important with the coronavirus pandemic prompting more online classes for students and work-from-home arrangements for teachers. workers.
“Kids in school need to be able to do their homework,” Cook said of digital divide issues amplified by job losses and school and workplace closures during the pandemic.
Like other providers, city-owned Easton Utilities offered free hotspots and customer support at the height of job losses and school and workplace closures due to the pandemic. The local utility received a $13.1 million grant from the U.S. Department of Agriculture in 2020 to expand broadband infrastructure and access to remote and unconnected areas of the East Coast – one hour from Baltimore and 90 minutes from Washington DC
Nationwide in the Pacific Northwest, Business Oregon, the state’s economic development agency, oversees the Oregon Broadband Office. The state office is responsible for allocating Oregon’s $120 million from APRA’s $10 billion in dedicated broadband funds, as well as other funding sources.
The state will distribute a portion of these funds through grants to localities and nonprofits focused on digital divide issues where the poorest and most remote areas lag behind in broadband access.
The Oregon office is also expecting internet grant programs from the $1 trillion federal infrastructure program passed by Congress and Biden last year.
But higher construction costs and product and material delays could force broadband efforts to focus more on partnerships with the private sector and leveraging existing infrastructure rather than building new fiber and new connections.
This focus could help low-income communities where price is the biggest barrier to internet access, but challenge remote areas with no coverage and excessive last-mile connection costs.
Tom Schatz, president of Citizens Against Government Waste, said the watchdog group is concerned about the amount of money being spent on building government internet networks that could duplicate existing private infrastructure.
The watchdog group estimates that there is $800 billion in federal funds available for broadband networks, infrastructure and access.
“Our concern is that they’re not just going to get it right,” Schatz said.