* European, Asian companies announce plant investments
* Especially steel, chemicals sectors step up spending
* Cheap natural gas means low power prices, cheap feedstock
* Some U.S. companies bring back jobs
By Maria Sheahan and Georgina Prodhan
FRANKFURT/VIENNA, March 26 When Wolfgang Eder
and his team started looking around for a site for a new plant
for Voestalpine, the Austrian steelmaker he heads,
they had 17 sites in eight countries on their list.
This month, after more than a year of looking, they settled
on the U.S. state of Texas, after a boom in the production of
natural gas from shale extraction brought gas prices down to
just a quarter of what companies paid in Europe.
"In the USA, re-industrialisation is being promoted very
consistently, ambitiously and with great conviction," Eder told
Reuters. "Low energy prices gave us the final - and not
insignificant - push."
With cheap shale gas making the United States a magnet for
industrial companies like Voestalpine, many economists are
positing a return to industrialisation for the world's biggest
economy after more than a decade of consumption-led growth.
"America is currently seeing a renaissance of production,"
said Felix Schuler, a partner at Boston Consulting Group (BCG)
based in Germany who specialises in the industrial goods sector.
U.S. natural gas prices are $4 per million British thermal
units - having touched a decade low of $2 last year - well below
its 10-year average of about $5.70 and prices of around $14 in
Britain and almost $17 in Asia.
Voestalpine will use natural gas at its new plant, its
biggest investment to date at 550 million euros ($712 million),
to turn iron ore into sponge iron, which will later be used to
make crude steel.
Cheap natural gas not only cuts costs for companies that use
it as a raw material or feedstock for other products such as
chemicals, it also means lower power prices as utilities use
more gas to generate electricity.
Industrial companies pay about $40 per megawatt-hour of
electricity on the U.S. East Coast, where prices have dropped
sharply since mid-2008. That compares with about 45 euros ($58)
in Germany, 60 euros in Austria and more than 65 pounds ($98) in
Britain, creating incentives for energy-hungry firms in the
steel and chemicals sectors to invest in new plants and expand
existing facilities in the United States.
"The idea that energy costs in North America would always be
more expensive no longer holds true. The new reality is that
natural gas has turned that equation on its head," Peter
Loescher, the chief of executive of German engineering
conglomerate Siemens, said in Detroit last month.
The National Association of Manufacturers in the United
States estimates the shale boom will add 1 million manufacturing
jobs in the country by 2025 as long as natural gas price
increases remain moderate and industry regulation is favourable.
"I've spoken to several manufacturers from Europe and Asia
who are interested in the shale revolution," said Chad Moutray,
the association's chief economist.
Austrian fireproof materials maker RHI is also
mulling a new U.S. plant, while it cuts production capacity in
Europe due to lower levels of growth.
Tough targets designed to reduce greenhouse gas emissions in
Europe can also act as a push from the old continent.
RHI's chief executive told journalists this month that the
idea the company could cut its energy use by 5 percent a year to
meet EU targets was "in the realm of fairy tales".
"We set ourselves these challenges, but at some point one
must realise that European industry employs many people and
helps economic growth. What is the alternative? Shall we turn
Europe into a financial centre?" asked Franz Struzl.
U.S. manufacturing output was at its highest level since
mid-2008 in February, fuelled by a pickup in demand for cars and
homes as well as cheap energy. Manufacturers' new orders - an
indicator for future revenues - rose 3 percent in 2012.
U.S. companies including General Electric and Boeing
are also starting to bring back home some of the jobs
they had moved abroad to cut costs, helped by the availability
of cheap shale gas. Apple said late last year it
planned to move some production of Macintosh computers to the
United States from China this year.
"Two years ago, it was uncertain whether the pick-up in the
United States was just a catch-up effect. But by now there is
significant confidence in the sector that this is not a flash in
the pan," said Ulrich Ackermann, head of German engineering
association VDMA's Foreign Trade department.
Lower energy and feedstock prices help narrow the production
cost gap with countries such as China to make exports more
According to research and analysis firm IHS, a number of
large chemicals companies have announced plans to spend a total
of about $95 billion to build or expand facilities in North
America for exports, lured by cheap feedstock.
They are mainly in the production of ethylene, a basic
hydrocarbon used to make solvents, plastics and detergents.
South African petrochemicals group Sasol is
considering spending up to $7 billion on an ethane cracker
complex in the United States, Egypt's Orascom Construction
Industries is building a $1.4 billion fertiliser plant
in Iowa, and Taiwan's Formosa Plastics has expanded
plans for a new ethylene plant in Texas.
Japanese oil refiner Idemitsu Kosan and trading
house Mitsui & Co are looking into running a
petrochemical plant in the United States, which would export 30
percent of its production to Asia and Europe.
Austria's Voestalpine aims to send half the annual output of
its new plant in Texas back to its mills in Austria and use the
rest as a strategic reserve.
U.S. President Barack Obama last month laid out a plan in
his State of the Union address to bring manufacturing jobs back
to the country, including a network of institutes that would
teach new industrial skills.
In last year's address, he praised Germany's Siemens for job
training efforts at its gas turbine plant in Charlotte, North
Carolina, opened in 2011.
The investment by Siemens, which has a total U.S. workforce
of about 60,000, is tapping booming demand for gas turbines as
the U.S. power industry switches to natural gas from coal.
German speciality chemicals company Wacker Chemie
has also cited government incentives such as infrastructure
grants and tax credits as key reasons for its decision to invest
$2 billion in a new polysilicon plant in Cleveland, Tennessee.
Voestalpine's Eder said a secure energy supply, ease of
logistics and the availability of trained workers were important
in the company's investment decision, but the fact that his
company was "welcomed with open arms" played a major role.
"We miss comparable efforts for industrial activities in
Europe," Eder said.