Report: Manufacturing costs set to drop below China thanks to fracking

Source: Chem.info

By Aaron Hurd

Jul 13, 2015

A recent analysis by Boston Consulting Group and reported on by Fortune projected that manufacturing costs in the U.S. will drop below those of China within the next three years, due in large part to fracking.

As of now, the average cost to produce goods is only 5% higher in the U.S. than in China, and that the cost is expected to be two or three percent lower by 2018. 

Rising wages in China and increased industrial productivity in the U.S. contributed to that trend, but the report cited hydraulic fracturing as the primary reason for the shift in costs.

Increased production from shale formations led the U.S. to the top of global rankings for petroleum and natural gas production despite plummeting crude oil prices worldwide last year. As a result, the prices U.S. industrial customers pay for electricity now fall from 30 to 50 percent lower than the rates in other top exporting nations.

The Fortune report noted that increased domestic production can also curb transportations costs, particularly with trucks fueled by natural gas.

A BCG analyst noted that even the current 5 percent cost gap between the U.S. and China could persuade companies to produce domestically, thereby avoiding potential shipping delays and political complications.