A Faster Way to Bring Back Jobs
This week Shale Crescent USA (SCUSA) presented virtually to a large audience on Plastics News Ask the Expert, a luncheon program seen by processors who make the thousands of products we use every day. We were able to share our region’s opportunity for greater profitability, reliability and sustainability directly with decision makers. An IHSMarkit study showed over 70% of the demand for polyethylene and polypropylene, the building blocks for the products we need like healthcare PPE, medical equipment and consumer products is in our region. This region is where most consumer products and packaging is manufactured.
Processors can quickly add jobs in our region by adding a shift, opening up a new production line or making a new product. We saw this during the pandemic when a company in Charleston hired people and opened a production line to make hand sanitizer. Our message to processors was increased profitability, reliability and sustainability by expanding in the Shale Crescent USA.
SCUSA learned from its coast to coast radio interviews during the pandemic, Americans, regardless of politics, want to see manufacturing and the related jobs come back to the USA. People saw first-hand we didn’t have gowns, masks and gloves for our healthcare workers. Some were forced to wear trash bags. We learned our medical equipment like ventilators were being made overseas and were difficult to get. Hand sanitizer and sanitary wipes were hard to find. Some assembly lines had to shut down, not because their workers were sick with COVID but because critical items sourced overseas and were unavailable. Some of these products have started to be manufactured here. We learned 80% of our prescription drugs weren’t made in the USA any more.
How did this happen? Based on government statistics U.S. manufacturing jobs peaked in the 1970s at 19.4 million. People who have been around for awhile remember the Arab Oil Embargo of the 1970s and waiting in long lines to get gasoline on even or odd days depending on your license plate. OPEC was needed to meet our need for oil. They also controlled our gasoline prices. It was big news when the OPEC oil ministers met. We also knew to expect an increase in gasoline prices. There was nothing we could do about it.
Asian countries were also getting their oil from OPEC. Oil and natural gas provide fuel and the feed stock to make products. Cheaper labor in Asia became the differentiator making it cheaper to manufacture in Asia than the USA. Our manufacturing jobs left for Asia and the Rust Belt was born. When China entered the World Trade Organization in 2001 this accelerated. By 2010 the USA had lost almost 8 million manufacturing jobs. It was even worse since each manufacturing job creates 4-5 additional jobs. For example, in Albion, Michigan where I went to work out of college there were 32 small companies in that town alone making parts for the auto industry. When most of the auto industry went to Asia they shut down. Main street looked like a ghost town as restaurants, shops and other small businesses closed. Only the bars stayed busy.
We suffered through the energy crisis of the early 2000s. Suddenly the world changed with the Shale Revolution. By 2012 the USA was the leading oil and gas producer in the world. Gasoline prices fell from the $4 range to the $2 range thanks to American oil and gas. Fuel surcharges disappeared saving Americans money. As U.S. oil and gas production increased so did manufacturing jobs. The USA has gained 1.4 million manufacturing jobs since the Shale Revolution.
There was another very subtle change. Government data showed the Shale Crescent USA region was now producing more natural than Texas. Our region provides 85% of the new U.S. natural gas supply. SCUSA is producing 35% of U.S. natural gas. When we were in Tokyo in 2018 we heard, “We thought all the gas and oil was in Texas.”
U.S. manufacturers still assumed Asia had cheaper labor. China’s wage rates have continued to increase and U.S. productivity has increased thanks to technology like automation and robotics. A study by the Boston Consulting Group showed only a 4% difference between U.S. and Chinese manufacturing cost. The USA is equal to South Korea, 3% cheaper than Japan, 16% cheaper than Germany and 22% cheaper than France. When transportation cost to the consumer is added the USA wins big!
The USA imports over $500 billion in products annually from China alone. Much of this comes to our region. The eastern U.S. along with eastern Canada is probably the largest economy in the world. SCUSA is the middle of it. U.S. manufacturers and plastic processors can expand by making those imported products here. SCUSA has advantages of;
· Close to energy and feedstock
· Close to consumers
· Manufacturing costs competitive with China and other countries.
· Reliability. No hurricanes like the Gulf Coast. We can handle weather variations like extreme cold. We have shorter supply chains and close fast delivery of products to consumers.
· Lower carbon footprint and increased sustainability because of our shorter supply chains and close proximity to consumers. According to the Rhodium Group, Chinese GHG emissions have increased 60% to 14,400 MMT since 2007 as China increased manufacturing. U.S. GHG emissions have decreased 22% since 2007 to 5,160 MMT even with the increase in U.S. manufacturing.
Bringing manufacturing back to the USA and to SCUSA creates high wage jobs, cheaper consumer products (We are seeing this already as mentioned last week) and faster more dependable delivery to consumers. Manufacturing here can reduce or eliminate Chinese manufacturing expansion and finally stop increasing Chinese GHG emissions. A win for everyone. Feedback from our presentation has been positive. We are already having discussions with companies, we previously had not met, about expansion. A great journey starts with a single step. All things are possible.