Manufacturing is poised to remake our future, McKinsey study shows

Despite the Great Recession, manufacturing worldwide not only survives, but thrives, accounting for approximately 16 percent of global gross domestic product and 14 percent of employment.

“Globally, manufacturing continues to grow,” sparking innovation and competitiveness, while driving research and development, exports, and productivity growth in the developed world, according to a new study by the McKinsey Global Institute.

Shale gas fueling industrial revival

News reports suggest an even more robust manufacturing future, at least in the United States, courtesy of abundant and affordable supplies of shale gas. In particular, shale gas [is] fueling an American industrial revival, as a recent headline in The Washington Post read.

“Manufacturers have plans to invest as much as $80 billion in U.S. chemical, fertilizer, steel, aluminum, tire and plastics plants,” The Dow Chemical Company told the Post.

America’s chemical manufacturers rely on abundant, affordable supplies of natural gas as a raw material, or “feedstock,” to make the chemical building blocks that go into nearly 96 percent of all domestic manufactured goods.

So, the main reason for the investment “comes back to the massive competitive advantage the United States has with natural gas today,” George J. Biltz, Dow’s executive vice president for energy and climate change noted to The Washington Post.

A new dynamic phase for manufacturing

The McKinsey report emphasized that manufacturing has entered a dynamic new phase, creating new market opportunities despite myriad challenges.

“As a new global consuming class emerges in developing nations, and as innovations spark additional demand, global manufacturers will have substantial new opportunities — but in a much more uncertain environment,” the study noted.

“For policymakers, supporting manufacturing industries and competing globally means that policy must be grounded in a comprehensive understanding of the diverse industry segments in a national or regional economy, as well as the wider trends affecting them,” the report added.

Shapers of energy policy, for example, must consider which industries will be affected by energy costs and whether cost differentials “will trigger a location decision,” the McKinsey study said.

Boston Consulting Group’s Harold L. Sirkin would seem to agree, telling the Post, “All of a sudden, the equations start changing about where you produce things. Even in industries where the cost structure includes only 1 or 2 percent electricity, that could make the difference.”

Visit ChemistryToEnergy.com to learn more about how the U.S. can maximize the national benefits of natural gas from shale while implementing balanced regulatory policies that protect our environment.

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