Game Changing Scenarios
Four Game Changing Scenarios offer diverse opportunities for U.S. manufacturing companies. With 90% of all manufactured products using chemicals, the shale gas tsunami will sweep through the chemical industry into nearly all areas of manufacturing.
Plastics, in particular, will have the opportunity to replace not-in-kind materials in entire product sectors. This includes ubiquitous items such as the paint can, glass food jars with metal tops, wood decking and fencing – the list is almost endless. The newly compelling economics and often superior performance of plastics will cause rapid and dramatic shifts. These wholesale not-in-kind switches are disruptive and often not understood by the market share incumbent. As they the visibility of the coming tsunami allowing them to switch, such as wood processing mill of decking to plastic decking manufacturing cost.
A typical automobile or refrigerator already has 20% chemical content. In these products, plastics compete with other products such as metals and glass. If the cost of plastics decline dramatically, manufacturers have an economic incentive to increase plastics content. In many cases this is complicated by a multi-tiered supplier structure to the OEM. It also requires manufacturing companies to re-engineer their designs as well as production process account for the different properties of plastics.
Oil versus Natural Gas
Certain chemicals, such as nylon, can only be technically produced via oil as a feedstock. Oil is a global commodity while natural gas, due to difficulty in trans-ocean transport, is a regional commodity. Oil prices continue their global rise, while U.S. natural gas have declined dramatically. This creates a cost incentive to replace oil based chemicals with those based on U.S. inexpensive natural gas. Manufacturers will need to re-engineer parts and designs to take in consideration the different properties of substitute chemicals. Patent and technologies could provide either a barrier or opportunity.
Import - Export
Over the last several decades, a number of manufactured products have shifted in large part or even entirely overseas. These include high volume, everyday products such as toothpaste tubes, ball point pens, and medical consumables. Products with a high chemical content are potential candidates to return to U.S. for manufacturing. They will be not aided in by lowered chemical prices but also in avoidance of trans-ocean logistics. For many of these products is no longer an existing US manufacturing base, thus whole product areas become wide open opportunity for new manufacturing players.