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“The once-formidable benefits provided by manufacturing in China, India and other Asian states are eroding,” says Dr. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association International (FMA). Kuehl made his comments in the current FMA economic update newsletter Fabrinomics.
“The most important factor is cost of transportation, and it’s feeding what’s being referred to as ‘near shoring,’” Kuehl says. “This means hauling cargo across the ocean in a diesel burning ship isn’t as cheap as it once was. It’s now more cost effective to be closer to the U.S. market, which has sparked a wave of relocation plans.
“Other costs are rising as well,” he adds. “Chinese labor isn’t as cheap as it once was, especially in the fast-growing coastal cities. The cost of energy is increasing, and China is contending with 8.3% inflation percolating through its economy. The same pattern is developing in other Asian supplier states.
“And, now, we’re seeing a lack of capacity in many Asian states,” Kuehl says. “There may be a large labor pool, but there is not a large enough pool of skilled labor and capable managers. This has established limits to what can be accomplished there.”
According to Kuehl, these developments point to a return of the manufacturing sector to Mexico, Central America, South America and even sections of the United States.
“China, for example, has never been easy to work with,” he adds. “Now that the cost advantages are fading, the appeal of working with our neighbors to the south has become obvious.”
Based in Rockford, IL, the Fabricators & Manufacturers Association International, is a professional organization with more than 2,300 members working together to improve the metal forming and fabricating industry. Founded in 1970, FMA brings metal fabricators and fabricating equipment manufacturers together through technology councils, educational programs, networking events, and the FABTECH International & AWS Welding Show. FMA also has a technology affiliate, the Tube & Pipe Association International (TPA), which focuses on the unique needs of companies engaged in tube and pipe producing and fabricating.