US gas boom lures foreign investors

The foreign investment environment in the US could soon become overcrowded, as the natural gas boom draws in overseas manufacturers.

In a bid to capitalise on the cheap and plentiful supply of fuel and feedstocks, investors are flocking to the country and will continue to do so for the rest of the decade, reports The Wall Street Journal.

Both domestic and international companies either have or intend to invest billion of dollars in plants designed to pump out chemicals, fertilisers, plastics, metals and fuel from gas.

Foreign companies, either alone or as part of a joint venture, are certainly making the most of the opportunity, as gas in the US costs a fraction of European or Asian rates, the newspaper reported.

Boston Consulting Group believes international companies will invest at least $50bn (£30bn) through to the end of the decade on low-price natural gas.

Undoubtedly, reasonable energy costs are making the US the ideal place for investment - a fact Commerce Secretary Penny Pritzker identified earlier in the summer.

David Constable, Sasol chief executive officer, told the Wall Street Journal: "All of the experts' views show a gas price that continues to stay reasonably low, even taking into account LNG exports, and an oil price that is going to be above $100 a barrel."

Petrochemicals are proving to be particularly ripe for investment, accounting for one quarter of the $160.5bn in inbound foreign direct investment in the US last year.

The BISWorld’s Petrochemical Manufacturing market research report recently showed the sector grew by 2.6% this year, after a period of "significant volatility" over the last five years. However, as the economy has improved, downstream demand has increased.

Yet BISWord isn't convinced the worst is over, stating that domestic operators in particular will be faced with obstacles - namely rising input costs (which affect prices) and performance.

Nevertheless, heightened demand and the dependence on petrochemicals nationwide mean the sector is still a strong investment proposition.

Companies looking to take advantage of the gas boom in the US can always benefit from expert local knowledge. TMF Group has the global reach to help businesses of all sizes when expanding across borders and offers experts on the ground.

 
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