Manufacturing Is Fueling America's Recovery

By Charles Drevna

Whoever said the days of American manufacturing were over spoke too soon. America's manufacturing days may have stalled for a period, but they are far from over. I see many good days ahead for our nation and manufacturing, but it will take work and the cooperation of government and business to make it happen. Advances in shale development have changed the picture. Today, supplies of oil, natural gas and natural gas liquid (NGL) from shale, once thought unobtainable, have led to record-breaking volumes of fuel and raw materials that will rewrite our future.

While attention has primarily focused on the ability of newly-tapped oil deposits to guide the country toward a future of energy independence and national security, there is a larger story to tell. Businesses and consumers are seizing upon the abundant supply of shale natural gas as a cheaper source of energy. But what is also occurring, primarily under the radar, is the narrative of how NGL is transforming the nation's manufacturing sector.

You may recall from a past chemistry class that NGL is used to produce petrochemicals, which is the feedstock, or building blocks, used by manufacturers to produce consumer goods and plastic products. Petrochemicals touch the average person multiple times just in getting dressed in the morning. Shampoo, soap, toothpaste, deodorant, combs, blow dryers and clothes are just a few modern conveniences made possible as a result of petrochemicals. Increased production of NGL is behind the $80 to $100 billion in planned investments by the petrochemical industry and will help revive communities that lost their manufacturing base decades ago.

A little historical perspective, beginning in the 1970s: higher costs for raw materials and labor, among others, were significant factors that prompted many American manufacturers to move their operations overseas in order to remain globally competitive. But new supplies and availability of raw materials has shifted in our favor and manufacturers are looking at the United States once again. Today, due to the cost advantage of energy and raw materials, and manufacturing facilities and infrastructure already in place, many companies are beginning to move their operations back within our shores.

In Youngstown, Ohio, for instance, V&M Star is building a $650-million steel mill 34 years after the iron and steel industry left the region. Just last year, General Electric began building appliances previously made in China and Mexico in its long-deserted Appliance Park manufacturing plant in Louisville, Kentucky. Nucor Corp. is opening a new plant in Louisiana this summer. In Houston, Texas, the number of employees in the manufacturing industry has increased from 165,000 to 250,000 since 2009, as companies grow to keep up with the demand for parts needed in the hydraulic manufacturing process. These are just a few examples of the millions of dollars in planned investments as a result of the increased availability of natural gas and NGL.

But there's more to be done if we are to truly capitalize on the full potential of an American manufacturing renaissance. Important factors to consider include infrastructure, labor and regulatory roadblocks. Although we already have much of the necessary infrastructure in place to convert raw materials to feedstocks and materials that manufacturers use, more is needed to connect the new sources of raw materials to where they are needed for manufacturing.

Without the right infrastructure in the right places, manufacturing as a whole is inefficient, and companies find it hard to be competitive. While the U.S. already has a tremendous head start on this front, many of the raw materials manufacturers need today are located in previously-untapped areas of the country. This geographical shift has created "bottlenecks" in the movement and storage of raw materials. New infrastructure such as storage facilities and pipelines are needed to create a more efficient process. Once that infrastructure is in place and existing structures are upgraded, the manufacturing supply chain will get a much-needed boost.

The labor piece of this puzzle faces similar obstacles. As manufacturers return to the U.S., they are facing a shortage of workers with the skill set needed to work in the industry and to build out the infrastructure. Yet that is changing, too. Efforts are underway to educate and inform a new generation of manufacturing workers about opportunities in the industry.

Our government will play an important role in the return of manufacturing and the jobs it will create. Responsible development of shale reserves can make the U.S. a global leader in energy production and at the same time, a manufacturing powerhouse. But excessive regulation will have a detrimental effect on the industry's growth. Regulations should be based on science, technology, and real-world practices. Moreover, an efficient permitting process - one without onerous complications - is needed to ensure future progress.

I believe that America's best manufacturing days are ahead of us. Newly-discovered shale formations are ushering in a new era in the way everyday consumer products are produced in this country. The growth seen already in places like Texas, Ohio and Kentucky are prime examples of how the manufacturing industry is fueling economic recovery. This country is turning a corner - one that is vital for future American prosperity. Let's allow it to proceed.

Charles Drevna is president of American Fuel and Petrochemical Manufacturers.

Charles Drevna
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