Energy is a Boom for Manufacturers
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In the State of Union Address, President Obama talked about helping American manufacturing create more jobs, and he talked about the important of increased energy development. I want to make the case that they’re intertwined.
America’s energy boom is playing role in revitalizing the manufacturing sector. Having abundant, affordable energy for their operations is the most obvious benefit from the shale boom, but there’s more to it. All the drilling rigs, pipes, tanks, and other materials to get energy out of the ground and move it to where it's needed have to be made. New investments are being made and new jobs created from increased demand.
The hydraulic fracturing and horizontal drilling requires a lot of steel pipe. For Youngstown, OH, this demand means hope after years of economic decline. V&M Star built a pipe mill capable of producing 500,000 metric tons of seamless pipe of various sizes. Dimiter Kenarov of the Pulitzer Center reports:
Where once stood the Brier Hill Works of Youngstown Sheet & Tube, a slick new $650 million plant with 350 employees, V&M Star, opened to great fanfare in October 2012. V&M Star makes steel tubes for the gas industry. A few smaller steel shops have also made a comeback, while restaurants and motels are getting busier, according to interviews with owners.
In Duquene, PA, the “overwhelming burden of customer orders” for coated pipes for natural gas drilling caused Dura-Bond Industries to open a new plant.
Also, according to Bloomberg, Turkish company Borusan plans to invest $150 million “to expand its U.S. energy pipe business with a production plant in the country as new technology propels a surge in U.S. oil and gas production.
Staying in the Northeast, Sheryll Poe featured Alberts Spray Solutions of Williamsport, PA. This small business with employee in Central and Northeast Pennsylvania and Ohio offer spray liners for tanks that hold water and other fluids on drilling sites tapping the Marcellus and Utica Shales. Business is doing so well that the company is considering expanding to Texas to plug into the expanding shale production there.
RBN Energy’s Sandy Fielden has declared 2013 the “Year of the Tank Car,” because of the increase in moving oil by rail. This has put pressure on rail car manufacturers:
Union Tank Car Co. is working at full capacity and American Railcar Industries Inc. has a backlog through 2014. Trinity Industries Inc. - the biggest railcar producer - began converting wind-tower factories last year to help meet demand for tank cars. In the first two weeks of January 2013 manufacturers received orders for more than 2,500 new tank cars and there is a backlog of 40,000 cars on order.
She reports that if you order a tank car today, you’ll wait 18 months until delivery.
I’ll end this brief survey by noting the proposal to build more energy infrastructure in Louisiana:
Genesis Energy plans to spend about $125 million on new rail and pipeline infrastructure to connect ExxonMobil's Baton Rouge, Louisiana, refinery to more than 500,000 b/d of new crude supply, the midstream company said in a statement Monday.
The project includes upgrades to the company's Port Hudson, Louisiana, terminal including barge and truck improvements and construction of a new 350,000 b/d pipeline running from the terminal to a tank farm connected to the refinery.
The project could attract Bakken Shale crude from North Dakota, Eagle Ford Shale crude from South Texas and heavy crude from Canada, among other grades, said Andy Lipow of Lipow Oil Associates. ExxonMobil's Baton Rouge refinery processes both light sweet and heavy sour crudes, he said.
This survey only scratches the surface of how manufacturers are benefiting from expanded domestic energy production. Jobs are being created, investments are being made, and we’re seeing positive economic growth. Imagine the possibilities if we’re able to unleash our full potential.