January 28, 2022
This week Intel announced a $20 Billion investment to build its most advanced semiconductor chip manufacturing operation near Columbus, Ohio. The project will create 3,000 new jobs paying an average $135,000 a year plus benefits and 7,000 construction jobs. The Intel project will also generate jobs for other suppliers and small businesses. It is important these chips will be manufactured in the USA rather than overseas. Companies have parking lots full of new vehicles waiting for semiconductor chips. Future automobile and truck production and other electronic products won’t need to wait on chips manufactured overseas once this plant is completed.
Peloton announced its first U.S. facility will be built in the Toledo, Ohio area in the middle of most of its customers. This project will be an answer to supply chain problems and delays from overseas shipments. Nucor Steel Company announced plans this week to build a new state-of-the-art $2.7 billion sheet mill plant near Point Pleasant, WV creating 800 full time jobs. Green Power Motor Company plans to manufacture zero-emission, all electric school buses in South Charleston, WV. A $500 million investment.
Companies are beginning to understand the financial advantages of manufacturing in the USA where most of their customers are located along with the abundant economical energy they require to operate. Companies avoid the cost of thousands of miles of ocean expensive ocean transportation and months of shipping. In Shale Crescent USA’s most recent study the cost of ocean shipping was as much as 60% of the cost for some products. In all cases, ocean shipping cost was much greater than the cost of labor for imported products. These are conservative percentages since they were based on only $10,000 per container instead of the current $20,000+ container shipping costs.
In addition to these are large investments, smaller companies are bringing manufacturing back to the USA. When the pandemic started, the only way I could get a U.S. made facemask was to have my wife make it. We just purchased U.S. made N95 face masks. Hand sanitizer is made in the USA again. One company saw what was happening at the beginning of the pandemic and brought 100% of their manufacturing to North American from Asia. We just connected them to a local company who can make the products they are importing from Canada in the Shale Crescent USA where most are being sold. This will be a win for both companies and create more good jobs. A South American company we met at the World Petrochemical Conference in 2018 has now located in Pennsylvania and expects to be operational in May using recycled plastic for their feedstock.
Other small to midsized companies in the region are quietly leaving their Asian suppliers for U.S. manufactured goods. Manufacturing in the USA now makes good economic sense. Companies are eliminating thousands of miles of expensive ocean transportation. The cost of shipping a 40-foot container has gone from $2,000 to over $20,000. Shipping time has become unpredictable going from 30-45 days to 60-90 days or more forcing manufactures to increase inventories. It is now cheaper to make many products in the USA. Feedstock and energy are here as well as consumers.
The key to expanding manufacturing in the USA is affordable dependable energy and feedstock. Europe shutdown most of their coal power plants in favor of weather dependent energy sources. This was a choice. When North Sea wind fell short of demand, they turned to natural gas to keep the lights on. Because last winter was so cold their natural gas storage levels are low. They turned to LNG a global commodity. Europe is now paying over $30 per MCF of natural gas compared to $4-5 per MCF U.S. consumers pay.
Europe has had to import coal to meet power needs where plants are still able to operate. Things may only get worse. Gazprom (Russia’s natural gas company) has been reducing gas deliveries to Europe on Nord Stream One. Other natural gas pipelines flow to Europe from Russia through Ukraine. Rising tensions between Russia and Ukraine could disrupt these flows. Europeans can expect continued price increases of almost everything and possible shortages like fertilizer, increasing food cost. Factories and petrochemical plants are dealing with energy shortages and unpredictable costs causing them to consider relocating to the USA.
Sound engineering requires 100% back up for all weather dependent energy. We can learn from Europe and use an all of the above energy policy. Weather dependent energy has a place in the mix and works best when backed up with a fuel like natural gas. We need to use nuclear power and our abundant fossil fuels like coal, oil and natural gas to have economical and abundant energy. The more weather dependent energy in the mix, the higher energy prices become. Europe, California and New England are examples.
The Congressional Budget Office estimates the cost to reduce U.S. emissions to almost net zero by 2050 is $11,279 per person. That is $45,116 annually for a family of four. How many families can afford that? The cost to achieve 20% of net zero is a modest $75 per person. To achieve 40% of net zero they estimate the cost to be $485 per person or $1,940 for a family of four. Above 40% the costs jump dramatically. Americans can reduce global emissions and these costs by buying products manufactured in the USA eliminating over 20,000 miles of dirty ocean transport and emissions.
New ideas require time for acceptance. For decades the cheapest place to manufacture was Asia. Companies are beginning to realize this is no longer true. They are relocating to and expanding in the USA and SCUSA. The Shale Crescent USA is the best place for increased manufacturing because companies can locate on top of their energy and feedstock and in the middle of their customers. This creates high wage jobs and raises the standard of living for people.
Thoughts to ponder.
Greg Kozera, [email protected] is the Director of Marketing and Sales for Shale Crescent USA. www.shalecrescentusa.com He is a professional engineer with a Masters in Environmental Engineering and over 40 years’ experience in the energy industry. Greg is a leadership expert, high school soccer coach, professional speaker, author of four books and numerous published articles.