Non-Petrochemicals and the Southern Manufacturing Renaissance

How does the manufacturing movement look in the South if you take petrochemicals out of the equation?

By Mike Randle

Everyone knows by now that manufacturing is the hottest aspect of an improving U.S. economy. Since the end of the recession, manufacturing production has increased by 30 percent, doubling the growth rate of the economy as a whole. The four-year run is the longest period "manufacturing has outpaced U.S. economic output since 1965," according to a recent report by the U.S. National Economic Council.

Houston was recently named by Forbes as the best city in America for manufacturing. Leading the manufacturing parade in the Houston region are $35 billion in planned refineries that will be under construction next year. But it's not just Houston that is thriving on the manufacturing front. Throughout oil-rich Southern states, manufacturing is building a beachhead like no time in decades.

The Lake Charles, La., region, Baton Rouge, New Orleans, Lafayette, Corpus Christi, Dallas-Fort Worth, Odessa, Midland, San Antonio, Oklahoma City and Tulsa, just to name a few, are experiencing a rebirth in the manufacturing sector that is significant to each of their economies. And almost all of the gains in those markets are coming from announced, pending or current petrochemical projects that represent more than $125 billion in investments. (see article on petrochemicals that follows this one).

But manufacturing is booming all over the South. June saw the sector grow at its fastest pace in four years. Also listed in their top 10 for large manufacturing metros, Forbes cited Nashville, Louisville, Austin and Birmingham. None of those markets have anything to do with petrochemicals.

In the question and answer portion of a talk I made recently I was asked if the petrochemicals industry in Louisiana and Texas was an important factor in this manufacturing revival the American South is experiencing. My answer was, "Are you kidding, man?"

It's certainly obvious the petrochemicals industry is the primary driver in the manufacturing revolution the South is seeing today. Reshoring, make it where you sell it, nearshoring and onshoring are the other primary drivers in this five-year manufacturing wave that has washed onto the South's shores as well. It is really a perfect economic storm, where the planets and the stars are aligned like no time we have ever seen. 

Yet, if you take the oil and gas and chemical sectors out of the equation, what other manufacturing industries are thriving in the South and where are the game-changing non-petrochemical plants going? It's a good question, one that needs to be addressed if we are to truly understand this rare but welcomed manufacturing revolution.

So where is this manufacturing revolution occurring in the South that is not petrochemicals-based? Well, start with the No. 1 industry in the region based on projects announced over the past 20 years and that's the automotive industry. The auto industry is a mile wide and a mile deep in the South. Every state in the Southern Auto Corridor benefits from its investments, even those that are not home to original equipment manufacturers.

In our annual assessment of industry sector performances, we split oil and gas and chemicals in the ranks. They are certainly interrelated, but chart No. 1 shows that petrochemicals combined are the No. 1 manufacturing sector in the South since the region's economy got big-time legs in 2010. But when oil and gas and chemicals are separated, automotive rules.

Chart No. 1

Top Manufacturing Sectors 2010-2014*

* Number of manufacturing projects announced in the South meeting or exceeding 200 jobs and/or $30 million in investment in the top 10 industry sectors from Jan. 1, 2010 to June 30, 2014. Source: SB&D

Chart No. 2

Game-Changers
Top Non-Petrochemical Manufacturing Locations SB&D 100 2010-2014

* There are 19 additional cities with 3 non-petrochemical projects that made the SB&D 100 2010-2014.

Automotive

The automotive sector has been so active over the past four and a half years, giving you samples of its growth is not a problem. OEM and supplier expansions, as well as new supplier projects, are announced every week. One of the automotive supply sectors that has really grown is the manufacture of tires by foreign-owned companies in the region. Several Southern states have captured significant projects in tire manufacturing.

South Carolina particularly stands out. In the fourth quarter of 2013, the Palmetto State became the nation's largest tire-making state, producing 89,000 tires a day. That beat Oklahoma's production of 88,000 tires a day. So the South is home to the top two tire-making states. South Carolina is also exporting more tires than any other state, accounting for 30 percent of the nation's overseas market.

Singapore-based Giti Tires' announcement in the summer that it will build a $560 million, 1,700-employee plant in Chester, S.C., brings investments made by tire manufacturers to $3.5 billion in the state since 2011. Those investments will result in the creation of over 5,000 jobs.

New and existing tire plant projects in the South 2011-2014:

*$INV = investment in millions

Food & Beverage

This sector has expanded substantially in the South post-recession. The food and beverage sector's growth is important since most of the projects are located in rural areas of the South. Here are the highlights from the past year:

*$INV = investment in millions

General Manufacturing

This sector includes many different manufacturers from toothpaste to tissue paper to firearms to contact lenses. Here are some of the larger projects from the general manufacturing sector announced in the South in the past two years:

*$INV = investment in millions

Aviation & Aerospace

This industry is about to take off. Airbus is building its full assembly facility in Mobile, Ala., that will be finished next year and Boeing is into its third year of 787 assembly in North Charleston, S.C. But that's just the commercial jetliner sector — two of just three full assembly commercial jet facilities in the U.S. Aerospace, like automotive, greatly affects the economies of almost every state in the South. Look for this industry to grow as fast as any in the next few years. (In October, SB&D is publishing a bonus issue on aerospace in the South.)

*$INV = investment in millions

Building Materials

This category, which essentially includes anything that is used to build and finish both residential and commercial structures, was slammed during the housing crisis. Dalton, Ga., called the "flooring capital of the world," was one of the hardest-hit communities in the South during the recession. This year, however, it was the South's comeback kid as it was named by SB&D as the 2014 "Small Market of the Year" because of some massive job-generating projects in the flooring industry captured in calendar year 2013.

*$INV = investment in millions

Electronics

During the 1990s, economic development agencies in the South were focused like a laser on the recruitment of this sector, which back then was centered on the semiconductor industry. There has been some activity in semiconductors over the years, but not much recently. Instead, the electronics industry is a hodgepodge sector with all kinds of things manufactured in the South.

*$INV = investment in millions

Metals

The natural gas boom in the region has certainly sparked a round of new plants in the metals sector. The expansion of the automotive and aerospace industries in the Southern Auto and Aerospace corridors has also supported growth in the metals sector in the past year. Here are some examples:

*$INV = investment in millions

Furniture

The reshoring age is bringing with it some not-so-advanced industries. Furniture manufacturing, which was left for dead more than a decade ago, is returning back to the rural South from Asia. Most of the projects are returning to the traditional furniture manufacturing regions of Mississippi, North Carolina, Tennessee and Southwest Virginia. Here are a few examples:

*$INV = investment in millions

Textiles & Apparel

This is another traditional, old-line industry that is coming back from the dead as a result of the reshoring age. Here are some examples of activity from the textiles and apparel sectors:

*$INV = investment in millions