Up to 25% of U.S. manufacturers are considering shifting their domestic operations offshore if rising chemical costs -- as well as rising costs for natural gas, a feedstock important to many -- are not controlled, according to a report by the National Association of Manufacturers (NAM).

Business leaders surveyed overwhelmingly said the government should pay more attention to U.S. energy policies, according to the 26-page report by AMR Research and The Manufacturing Institute, the research and education arm of NAM. The association surveyed 165 U.S. manufacturers ranging in size of fewer than 100 employees to more than 50,000.

Ninety percent of those surveyed expect to see costs rise, with 62% expecting the increase to be "substantial." The survey also indicated that 55% of the companies overall have "significant, direct dependence" on chemicals for their production and around 66% depend directly or indirectly through their suppliers on chemicals as a major raw material. About half of the companies stated they could not replace materials with substitutes.

"Chemicals are a critical link in the supply chain for two-thirds of U.S. manufacturers, but America's chemical industry is threatened by rising domestic natural gas costs," said NAM CEO John Engler. "At stake is not only the future health of chemical manufacturing firms, but also the thousands of companies that use their chemicals to make everything from crayons to computers. America needs a robust energy strategy to ensure affordable supplies, future development and greater efficiency.."

The study noted that domestic energy costs in the United States -- especially those for natural gas -- have risen dramatically compared to other major industrial economies. It also found that none of the more than 80 new, large-scale chemical plants now on the drawing board, each an investment of $1 billion or more, is planned for the United States.

"Energy policy drives the competitiveness of domestic chemical production, which is the most critical link of the manufacturing supply chain for chemical-using manufacturers," said Engler. "More needs to be done to ensure America's energy security and competitiveness."

To read the report, visit www.nam.org/chemicalcoststudy.

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