Industrial Revolution

 | Apr 20, 2012 | 7:56 AM EDT
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Someone actually said it. You can manufacture products more cheaply in the U.S. than China. Chuck Bunch, the amazing CEO of PPG Industries (PPG), said that last night on "Mad Money" and made it clear that with wages going up 10% a year in China and with the much more expensive energy costs there than here (natural gas, of course), he can make his coatings and paints in the U.S. with a real cost advantage.

This is the industrial renaissance that the lower natural gas prices are bringing. We know we have it with Dow Chemical (DOW), as it is siting plants here not overseas. You know we have heard it when it comes to Owens-llinois (OI), where glass is made with natural gas.

But I think this is the beginning. We are going to see a lot of this. It will drive construction, a terrible industry so far, and if it drives construction, you are going to see a better tone for a lot of the economy, as banks have complained endlessly this earnings period about a lack of construction.

We have many industries in the South and the Midwest that are gas-prone, but they do not have the infrastructure to carry the gas to the plant.

  • PPG does because it is located at the heart of the Marcellus shale.
  • Youngstown's steel business has it because of the Marcellus.
  • Nucor (NUE) has it in Louisiana, where it is using natural gas, not coal, to create steel.
  • Alcoa (AA) gets a ton of business because it manufactures the turbines that use natural gas to make power, bringing power costs down.
  • Cummins (CMI) makes natural gas engines for heavy trucks in the U.S..
  • Chart Industries (GTLS) is frantically trying to hire welders to build all of the equipment it needs to turn natural gas into liquid form to allow it to be exported.
  • Cheniere (LNG) will be hiring 3,000 to 4,000 workers now to build out its export facilities to take advantage of the sub-$2 natural gas, which allows customers all over the world to save money on their natural gas bills.

All of this is going to lead to an infrastructure construction boom that is unassailable, and we are only in the early innings as we continue to discover more and more uses for natural gas, particularly as we transition from a coal-based utility system to a natural gas system (if only to meet the tougher EPA regulations being handed down right now).

I think this is the theme for the revitalization of the U.S. economy. The idea that it is cheaper to build here than China is unheard of. Yet I think you will be hearing a lot of about it over the next few years. The competitive advantage, which we lost so many years ago, is back. It's just that no one is talking about it because it is so new that this was the first quarter we have heard about it. It certainly won't be the last.

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