By Peter A. Buxbaum, AJOT Is it possible that manufacturing will actually return to the United States from Asia? How might this impact the project cargo sector? A scenario that some call nearsourcing, in contrast to outsourcing, posits that manufacturing costs in Asia, and particularly China, are rising, and manufacturing costs in the United States are leveling off, to the point where it may be equally, if not more advantageous, to manufacture goods for North American consumption in some of the low-cost areas of the United States, rather than in Asia. A recently-published report from Boston Consulting Group says that the cost gap may be closed within five years. Industrial wages are a large part of the equation. In China, they are increasing at the rate of 15 percent to 20 percent per year. In one nearsourcing example, Ford Motor Company announced that is is bringing 2,000 manufacturing jobs back to the U.S., after it reached an agreement with the United Auto Workers to hire new workers at $14 per hour. The nearsourcing phenomenon has implications for the project and heavy lift cargo segment. One case in point involves Caterpillar Inc., which announced last year that it was relocating some of its excavator manufacturing from Japan to Texas. The AJOT has also learned that, at least in one project port, more turbines and other equipment destined for wind power projects are arriving from the United States and nearby Canada, at the expense of China. In August of 2010, Caterpillar announced that it would build an excavator plant in Victoria, Texas, investing over $200 million in an operation that will take up more than one-million square feet. The facility will also include some fabrication manufacturing for excavator production. “The decision to increase manufacturing capacity and employment in the United States is part of Caterpillar’s long-term strategic initiative to develop the appropriate global footprint to competitively produce hydraulic excavators,” said Gary Stampanato, Caterpillar vice president with responsibility for hydraulic excavators. Caterpillar currently produces two excavator models at a facility in Aurora, Ill., as well as in Belgium, Brazil, China, France, Indonesia, Japan and Russia. The new facility will manufacture the two models now made in Aurora, as well as several additional excavator models now produced in Akashi, Japan, and exported to the United States. “The expansion of excavator production in the U.S. will allow the Caterpillar facility in Japan to better serve the growing demand for excavators in Asia,” said Stampanato. Caterpillar has also recently announced plans to quadruple excavator capacity at its manufacturing facility in Xuzhou, China, primarily in support of growing demand in the Chinese market. “Based on our analysis of where customer demand is moving for excavators in the years ahead, it makes sense to increase capacity in Victoria now, so that we can better serve our customers,” said Stampanato. “Based on our comprehensive review of possible locations, Victoria’s proximity to our supply base, access to ports and other transportation, as well as the positive business climate in Texas made this the ideal site for this project.” “It is to be expected that high transportation cost goods such as heavy lift and project cargoes will be moved to more local production, in this case to the U.S.,” said Hal Sirkin, a senior partner and managing director at Boston Consulting Group and co-author of the report entitled, “Made in America, Again.” “In the case of project and heavy lift cargo, I don’t think we will see huge shifts in production,” Sirkin added. “But it makes sense that manufacturers will go a bit more local.” Caterpillar’s move may also have been motivated by a stronger yen versus the dollar, a situation which makes U.S. manufacturing more attractive. The case of Caterpillar is emblematic of the trend spotted in the BCG paper, which primarily contrasted manufacturing costs in the U.S. and China, and which posits that “China’s ove