Report: Utica Shale a Driving Force in Rebirth of Ohio Manufacturing
A new report out of Cleveland State University’s Center for Economic Development (CED) found the Utica Shale as a main driver for the sustained growth in northeast Ohio’s manufacturing industry. More specifically, the 2013 Manufacturing Economic Brief attributed regional growth to two main factors: continued national growth in exports, and the development of the Utica Shale.
The report finds:
“Ohio manufacturers can benefit from the Utica Shale development in two ways: (1) by becoming a part of the supply chain for down-stream and midstream industries and (2) by receiving cheap energy for their operations.”
Many steel manufactures have played a prominent role in supplying Ohio’s oil and gas industry with the steel they need for pipes and midstream facilities. Companies like Vallourec Star in Youngstown, US Steel and Republic Steel, both in Lorain, have been providing tubular steel to operators developing the Utica Shale. Other manufactures, like Ohio-based Timken, are providing ball bearings and steel for wellhead components.
With Ohio being the second largest raw steel producing state after Indiana, the development of the Utica Shale couldn’t have come at a better time. According to the CED report, the steel producing industry grew 25.3 percent between 2010 and 2011, and Ohio experienced the largest growth of all states.
In addition to being part of the supply chain, manufactures are enjoying the fact that energy costs are significantly cheaper than anticipated, again due to the development of the Utica Shale. Energy plays a very important role in the manufacturing of steel, with energy costs equating to 20 percent of the costs for producing each ton of steel. As such, lower natural gas prices resulting from increased shale development have made Ohio manufacturers more competitive.
Steel producers aren’t the only manufactures benefiting from low energy costs, either. Ohio has 27 manufacturing industries that rely on affordable energy to produce goods and provide jobs to Ohioans, according to CED:
“Ohio is home to 10 high energy intensive manufacturing industries that spend 2%-6% of their total expenditures on electricity and to 17 moderate energy intensive manufacturing industries which spend 1%-2% on electricity annually. Of these 27 industries, 12 are driver industries that are part of Ohio’s economic base.”
The manufacturing industry is one of the most important industries in northeast Ohio. In 2012, 14.4 percent of all employment in northeast Ohio was attributed to the manufacturing industry, which is 5.3 percent higher than the national average.
Thanks to Utica Shale development, manufacturing jobs will continue to provide high-paying jobs to Ohio residents. From the steel making the pipes and components on the drill rig to the energy savings from newfound resource abundance, northeast Ohio manufactures are better off than they were just a few short years ago – and the Utica Shale is a big reason why.