Sector News

Cheap shale gas to create thousands of new plastics jobs, group forecasts

May 14, 2015
News
(MarketWatch) — The U.S. shale-gas revolution was, to some, supposed to spur a manufacturing renaissance, as companies took advantage of cheap, abundant natural gas.
 
It hasn’t happened so far, but maybe it’s just a matter of time.
 
A new report from the American Chemistry Council released Wednesday forecasts the plastics industry will directly generate 127,500 new jobs over a decade. That’s because chemicals companies are bringing new production online to take advantage of cheaper energy.
 
The report says when the ratio of Brent crude oil prices to natural gas prices is over seven, it implies improved competitiveness for U.S.-based producers over foreign competitors. European and Asian producers use an oil-based feedstock to make plastic resins, while the U.S. uses ethane.
 
During the first quarter, the ratio of oil-to-natural gas prices was above 15.
 
Also helping U.S. companies become more competitive are rising overseas wages, higher transportation costs and supply chain concerns.
 
The report forecasts the peak investment will occur in 2018. “These are not turnkey projects,” said Martha Moore, senior director of policy analysis and economics at the trade group, whose members include firms such as 3M, BASF, Dow and DuPont. The group’s forecast is based on announced projects since 2010.
 
The report also forecasts 173,000 indirect jobs, from suppliers, and 161,000 jobs due to the pay of the new factory employees filtering into local communities. Though sizeable numbers, it a small portion of the some 16 million new jobs the Labor Department projects will be created nationwide over a decade.
 
Steve Russell, vice president of plastics, said the group didn’t factor in the recent rise in the U.S. dollar, but he said he didn’t expect that to make a significant difference.
 
“Our largest trading markets for shale-derived resins are in Asia and Latin America, there’s less trade with Europe,” he said. “It’s not something we would expect to have a significant impact on investment, jobs and trade.”
 
About half of the incremental plastic resin production is expected to be exported, with the remaining half available to the domestic plastic products industry, the group forecasts.
 
Manufacturing employment more broadly has seen a steep slide. As the millennium started, there were 17.28 million manufacturing positions, compared to 12.32 million in April, according to Labor Department data.
 
By STEVE GOLDSTEIN
 

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