US natgas, chemical costs threaten manufacturing

08 May 2007 16:22  [Source: ICIS news]

WASHINGTON (ICIS news)--Up to one-quarter of US manufacturers may move production offshore because increasing natural gas prices are in turn driving up the cost of essential chemical raw materials, a leading manufacturing group said on Tuesday.

 

The National Association of Manufacturers (NAM) said a study it commissioned shows that: “As a result of the increase in the cost and availability of chemicals - a vital raw material for most manufacturers - 25% of US manufacturing will move some production overseas if current conditions persist.”

 

The study, done by AMR Research and funded by NAM’s Manufacturing Institute, found that 90% of surveyed manufacturers are seeing increased costs for materials provided by the domestic US chemicals industry.

 

The report said that without relief from those increasing costs, 25% of US manufacturers will move some production overseas.  Across all companies that plan to move production offshore, said the study, the average amount of production shifted will be 32%.

 

“The impact of rising costs is severe given that most manufacturers depend on chemicals for some form of production and, as a raw material expense, chemical costs are a key driver of profitability,” said the study.

 

Kevin O’Marah, AMR senior vice president and co-author of the report, said:  “The most immediate and obvious risk is to the resilience and competitiveness of US manufacturing, and with it millions of jobs and domestic production.”

 

“But less obvious and more troubling,” he said, “is the consequence of an over-reliance on offshore suppliers.”  He said increasing US dependence on foreign-sourced manufacturing is a threat to the nation’s economy and national security and would impede the country’s ability to respond to a national crisis such as an earthquake, disease pandemic or terrorist attack.

 

John Engler, NAM president and former Michigan governor, said the AMR report highlights the need for a comprehensive US energy policy.

 

“Chemicals are a critical link in the supply chain for two-thirds of US manufacturers, but America’s chemical industry is threatened by rising domestic natural gas costs,” Engler said. 

 

“At stake is not only the future health of chemical manufacturing firms, but also the thousands of companies that use their chemicals to make everything from crayons to computers,” Engler added.

 

NAM is the largest and oldest US multi-industry trade association, and its 14,000 member firms include chemical and plastics manufacturers.

By: Joe Kamalick
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