NCPA - National Center for Policy Analysis


August 6, 2007

When it comes to changes in the price of oil, natural gas or most other energy sources, manufacturers and their 14 million U.S.-based employees have more at stake than any other sector of the economy.  That's because U.S. industry consumes fully one-third of all energy in the country -- to run plants and as a critical raw material or "feedstock" to make things, says John Engler, president and CEO of the National Association of Manufacturers.

A new survey by the Manufacturing Institute and AMR Research found that the departure of chemical companies from the United States has resulted in the rising cost and shrinking supply of chemicals.

The survey finds that:

  • Domestic chemical supplies are a vital raw material to most U.S. manufacturers. Overall, 55 percent have significant, direct dependence on chemicals as a feedstock.
  • Two-thirds overall depend, directly or indirectly via their suppliers, on chemicals as a major raw material.
  • Among firms, 50 percent say they cannot replace these materials with any substitutes.
  • Of companies, 90 percent see chemical costs rising, with 62 percent calling the increase "substantial."
  • Of those outfits, 43 percent see domestic chemical capacity decreasing.

Most disturbing, one in four manufacturing companies say they will shift some production offshore if chemical cost and supply pressures persist.

This could cause a ripple effect from large companies down to small companies as plants close or are downsized and as local suppliers lose their large company customers.

The fundamental question raised by this survey is whether U.S. lawmakers are aware of how energy policy affects the critical links in our 21st-century manufacturing supply chain -- in particular, chemical supplies -- and, in turn, the business decisions of downstream manufacturers across the board, explains Engler.

Source: John Engler, "Energy Ills Threaten U.S. Manufacturers," Investor's Business Daily, August 3, 2007.


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