How Shale Gas Extraction Is Fueling a Manufacturing Renaissance

The growth of shale gas extraction across the United States is offering a big boost to the plastics manufacturing sector. Ethane, a by product from shale gas, is used as a building block for many plastics products, and the growing supply is making the U.S. an attractive source for plastic resin sourcing.

The Plastic Industry Association’s 2016 Size & Impact Report said the availability of large amounts of natural gas is quickly turning the U.S. plastics industry from one of the highest to lowest-cost producers in the world.

Bill Carteaux, president and CEO of the Plastics Association, said the plastics industry will be an important part of the effort to support job growth in manufacturing going forward. He said plastics are now the third-largest manufacturing sector behind oil and gas extraction and automobiles.

“Things have been on the increase the last few years….There’s lots of reasons for optimism in manufacturing right now,” he said.

“There are a lot of reasons for optimism in manufacturing right now.”

The report noted strong growth in plastics processor investment in Ohio, Michigan, Indiana, Wisconsin and Texas. Regions that have big shale operations are already seeing new investments as plastics manufacturers aim to capitalize on lower-cost materials.

Prospect to Enhance Pennsylvania’s Opportunities in Petrochemical Manufacturing, a report compiled by IHS Markit, said that by 2030, production from the Macellus and Utica Shale reserves is expected to account for nearly 40 percent of U.S. production. It could be especially beneficial for places like Pennsylvania which has an existing plastics manufacturing base, a strong transportation infrastructure and two of the country’s top plastics engineering platforms. Shell Chemical Co. is currently constructing a petrochemicals plant in Pittsburgh that would produce more than 3 billion pounds of annual PE production.

Chemical companies also are investing billions to construct ethane cracker facilities in other states, including Louisiana. Hank Torbert, President of Alta Max, LLC, a specialty packaging manufacturer in New Orleans, said growing production of low costs of plastic resins in the state could offer new opportunities for plastics manufacturing in the region. “New Orleans-based manufacturers could produce packaging, automotive components, household items, electronic components, etc…Several existing factors make this an optimal choice of expanding our local economy,” Torbert said.

Cal Dooley, President and CEO of the American Chemistry Council, said the U.S. is in the midst of a “once in a lifetime opportunity” to further expand its base by capitalizing on gas formations. “We’ve got a competitive advantage globally, and the nice thing about the Appalachia region is that it’s close to the manufacturing center of the U.S., including the auto sector and the upper Midwest,” Dooley said.

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Craig Guillot
Craig Guillot is a business writer based in New Orleans, La. His work has appeared in Wall Street Journal, Entrepreneur, CNNMoney.com and CNBC.com. You can read more about his work at www.craigdguillot.com.

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