In 2012, the shale gas revolution was credited for revitalizing the chemical industry and sparking talks about domestic energy security, according to a recent Bloomberg news report.
The House Energy and Commerce Committee agreed with this rosy assessment in a recent blog post:
The shale gas boom is driving job creation and investment in the energy sector and is also helping to revive other struggling sectors of our economy like manufacturing.
In 2013, it’s the steel industry’s turn to emerge as the next major beneficiary of inexpensive natural gas.
Steelmaker revival
Bloomberg foresees “a wave of investment” that could revive America’s steelmakers, including a $750 million Nucor Corp. project in Louisiana and an Austrian-based company so confident in the prospects for inexpensive natural gas supplies that it is planning a $661 million plant in the United States.
At least five plants are in the planning or construction phase. All would use natural gas instead of coal to purify iron ore, reducing costs by 20 percent.
Steel industry consultant Michelle Applebaum told Bloomberg:
That technology has been around for 30 years, but for 29 years gas prices in the U.S. were so high that the technology was not economical. This is how steel will be moving forward.
Look for Australian and Indian steel companies to follow suit with investments, Barclays PLC analysts Biliana Pehlivanova and Shiyang Wang said in a December 2012 report. “The shale revolution is triggering an avalanche of industrial expansion plans,” Barclays’ report said.
From chemistry to steel
If some of this sounds familiar, it is. As Bloomberg noted, bountiful and inexpensive supplies of natural gas has already meant “a reversal of fortune for U.S. chemical producers after years of decline” and that chemical producers “are planning billions of dollars of plants around the Gulf of Mexico to capitalize on cheaper gas.”
In fact, the chemical industry has announced $45 billion worth of investments in new and existing facilities over the next several years, thanks to natural gas.
The United States has gone from being the highest cost major gas producer four to five years ago to the current lowest cost producer, American Chemistry Council President Cal Dooley said in a December year-end review of the industry.
What’s good for the chemical industry is good for the entire manufacturing sector. When the chemical manufacturers are booming, the ripple effect spreads throughout the economy. If that seems like a bit of a hyperbole, just remember that the chemical industry touches 96 percent of all manufactured goods.
“Prediction is very difficult, especially about the future,” Danish physicist Niels Bohr once said; but it’s impossible for manufacturers not to be optimistic that the benefits of affordable natural gas from shale are here to stay in 2013.
