Thursday, September 12th, 2013

New IHS Study: Shale Energy to Drive American Manufacturing Renaissance — Plastics Industry Especially Well Positioned for Growth

In a recent press release from SPI: The Plastics Industry Trade Association, SPI President & CEO Bill Carteaux said, “The abundant new sources of natural gas via shale is set to be a real game-changer for the U.S. plastics industry.”

The release discussed a just-released study from IHS — America’s New Energy Future: The Unconventional Oil and Gas Revolution and the Economy – Volume 3: A Manufacturing Renaissance — that assesses the coming impact of shale energy on the U.S. economy. SPI supported the study.

According to the IHS study, the long chain of shale energy development currently supports more than 2.1 million jobs, and that number will swell to more than 3.3 million in 2020 and nearly 3.9 million by 2025.

As for America’s third-largest manufacturing sector, the study projects that by 2020 the U.S. plastics industry will increase its output by 10%, create close to 15,000 new jobs and $868 million in labor income, and add $1.3 billion to the U.S. GDP.

Carteaux pointed out the multiple advantages that shale energy grants to the plastics sector compared to most other American manufacturing. “This new IHS study shows how shale energy development is creating a global competitive advantage for U.S. plastics manufacturers by bringing energy and feedstock prices down.”

The shale gas advantage works throughout the plastics value chain. Gas-based energy used to transform natural gas into plastic resin will cost less, as will the gas used as feedstock. In the next link of the plastics chain, the resin, which accounts for a substantial majority of the cost of a finished plastic component, will cost less. In addition, the cost of the energy needed to mold, extrude or form the resin into finished plastic products will also be lower thanks to shale gas.

The benefits of shale gas compound themselves all along the plastics value chain, and they even extend America’s advantage beyond its borders. “…consider that most resins in the United States are produced from natural gas,” said Carteaux, “while those in Europe and Asia are made from oil-based feedstock.”

As great as the potential benefits of American shale gas stand to be for the U.S. plastics industry, individual plastics companies must put in place specific strategies to reap the rewards. To that end, SPI and IHS are jointly sponsoring the Global Plastics Summit in Chicago, Nov. 4-6, featuring a program purpose-designed to help leaders of American plastics firms position their companies for profitable participation in the coming shale-gas-driven manufacturing renaissance.

In its report, IHS projects that the rise in domestic production will displace imports enough to cut the U.S. trade deficit by more than $164 million in 2020, which is about a third of the current deficit.

Thanks to abundant shale-based energy, American plastics companies face a golden opportunity to grow and profit, and have a golden opportunity to help them plan for it in Chicago this November. Fate, as they say, rewards the well prepared.

The complete report by IHS, America’s New Energy Future: The Unconventional Oil and Gas Revolution and the Economy – Volume 3: A Manufacturing Renaissance, can be downloaded here.

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