The Winds Are Shifting

It’s the domino effect for which we’re all patiently waiting – a decrease in natural gas prices will lead to manufacturing growth, increased employment, and more money for spending.

Domestic natural gas has allowed for reshoring processes to take hold and create momentum. The “shale revolution” has resulted in an abundance of low-cost natural gas that will soon catapult the United States to the top of the manufacturing industry. We’re positioning ourselves for global cost advantage.

The resurgence in manufacturing is also due to lower electricity costs. In fact, studies show that industrial electricity prices are 17% lower today than in 2008. What gives? Nearly every power plant constructed in recent years has been fueled by natural gas. Global management consultant, BCG, calculates that our country’s industrial electricity prices are now 30% to 50% lower than those of other major exporters.

As a result, the United States is ranked the world’s number two manufacturing nation – slightly trailing China. However, as previously mention in our blog The Reshoring Initiative Builds Momentum, China’s increasing wages have become an impediment to outsourcing production overseas. In fact, the BCG estimates, “the average cost to manufacture goods in the U.S. is now only 5% higher than in China and is actually 10% to 20% lower than in major European economies… by 2018 it will be 2% – 3% cheaper to make stuff here than in China.” [ U.S. Manufacturing Costs Are Almost as Low as China’s, and That’s a Very Big Deal ]

This, my friends, is of utmost importance.

America’s abundant low-cost natural gas and electricity have more than offset higher labor costs in the United States and have contributed to increased profitability for manufacturers. With increased profitability comes lower manufacturing costs, greater efficiency, and higher quality from improved technology. It makes our nation’s companies more competitive, creates jobs, and funnels money into the economy. Natural gas is accountable for tens of thousands of manufacturing jobs alone. As noted by the National Association of Manufacturers Center for Manufacturing Research, and IHS Economics, “Natural gas access contributed to 1.9 million jobs economy-wide in 2015. Shale gas put an extra $1,337 back in the pocket of the average American family. New natural gas transmission lines meant more than 347,000 jobs, with 60,000 in manufacturing. Total natural gas demand is poised to increase by 40 percent over the next decade. Key drivers will be manufacturing and power generation.” [ New Study Shows Manufacturing Demand for Natural Gas Will Grow ]

Always the optimist, I believe the best is yet to come. In the meantime, I’ll continue to look to the economy for signs of change. If energy costs are low, the price of steel is at its lowest, and reshoring is taking place, why have we yet to see the resultant positive economic impact?

Are you looking to reshore? We are willing and open to securing needs for capital expenditures and handling production. Choose Laser 1 Technologies for all your manufacturing needs. Give us a call today at (651) 451-9397.