Lower Energy Costs Bring More Manufacturing Back to US

File Type: Free Content, Article
Release Date: July 2015
I.CON 2015

In a reversal of a decades-long trend, manufacturing is returning to the U.S. According to a panel at I.CON, The Industrial Conference, June 10-11, in Long Beach, California, this trend should continue into at least the next decade.

Steven Schellenberg, senior vice president, business development, IMS Worldwide Inc., told I.CON attendees that huge increases in the supply of natural gas are resulting in greater production of polyethylene, a plastic used in packaging, and polypropylene, a thermoplastic polymer.

“In the next five years,” he noted, “the U.S. will add 22 billion pounds of new production of polyethylene and polypropylene.” Schellenberg estimated that 400,000 containers — 800,000 TEUs — of these products will be exported around the world. That will require 40 million square feet of warehouse space as export centers.

This … is already occurring on the East Coast, in Charleston, Savannah and Norfolk,” he continued, “and in Houston, Dallas and Freeport. Further, there are folks looking for that ‘needle in the haystack’ in the Los Angeles/Long Beach market: infill sites with rail service and access to the heavy container corridor where they can load several hundred rail cars with bulk resin for transport to container ships.”

Owen Kean, senior director, American Chemistry Council, said that because of the meteoric growth in natural gas production, chemical industry manufacturing projects are booming. The American Chemistry Council estimates a total of 225 new manufacturing facilities getting underway, valued at around $138 billion. These projects will create around 400,000 new jobs and expand economic output by $266 billion. “This is happening today in the U.S.,” said Kean, “and it will continue into the next decade.”

Thomas Tunstall, Ph.D., research director, University of Texas at San Antonio Institute for Economic Development, said that a decade ago, companies invested billions of dollars to build natural gas import terminals. Now they are spending billions to convert the import terminals to export terminals. Tunstall added that even though U.S. wages are higher than those in many other countries, the low price of natural gas here is driving manufacturing back to the U.S.

“Our analysis is that there will be about $100 billion in new projects put in place along the Gulf Coast in the future,” he said.