GLS CEO on How Tariffs Are Spurring Onshoring Resurgence

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00:00So did you expect to have this kind of career right now? Like, what do you do now day to day?

00:05Well, day to day, what I'm doing is trying to help companies match with communities for long-term

00:10mutual prosperity. And like you said, for the first half of my career, a lot of the work that

00:16I did was moving US manufacturing operations into other countries. And given the change in energy

00:25and workforce and the economy, the last half of my career has really been spent on moving them back

00:30in. So I think it's really interesting what you're talking about with primary metals and how the United

00:35States has all of a sudden become a prime location for primary metals.

00:41Didi, what sectors, speaking of, are you noticing,

00:44what clients of each sector are you noticing calling you the most?

00:49Well, I would say that really coming out of the pandemic, we saw a lot of activity in things like

00:55batteries and electric vehicles, clean tech. A lot of this was driven by the Inflation Reduction Act.

01:01And then obviously you had the CHIPS Act, which caused a lot of activity on semiconductors and

01:06the supply chains around that. But I would say that there's, generally speaking, capital-intensive,

01:12resource-intensive projects have been increasingly looking at the United States. And I would say that

01:18really started with the shale revolution when our energy prices started to become much more

01:23competitive relative to the rest of the world. It's interesting you point that out, Didi,

01:27because we were talking before you, of course, about U.S. Steel and Nippon maybe making an

01:31overture to actually build a new steel plant. There have been actually some deals in the works with

01:36regards to some other metals. That includes aluminum, a very energy-intensive industry. And I'm

01:40curious as to why you think that deal got done when it did, and what's the progress so far?

01:47Are you speaking about the EGA announcement?

01:51Yes.

01:52That deal? Yes. Well, I think it's been in the works for a while. I mean, the fundamentals for

01:57this project have been analyzed over many years, and it really just made sense at this time. I mean,

02:04aluminum is one of those things where the producer does not control the price of their product.

02:09And so they try to control their operating costs as much as they can. So it just made sense now in

02:16the U.S. with energy prices where they are, and also with the growing demand. And we only source about

02:2215% of the domestic demand for aluminum in the U.S. currently. So this will add about 600,000 tons

02:30to domestic manufacturing, which would almost double what we have right now. So it just,

02:35everything came together at the right time.

02:38That plant in Oklahoma, DeeDee, I am curious, when you go through that search process,

02:43when you were working on this here, how did you end up in Oklahoma rather than the other,

02:47you know, 48, 49 states?

02:51Yes. Well, it was a very comprehensive process. We really didn't want to leave any stone unturned.

02:57And so we basically looked at every state which had the right combination of electricity availability

03:03and the logistics infrastructure to be able to make this project a reality. So when you think

03:08about logistics, they're going to be importing alumina. And that is most efficiently done in

03:14marine vessels, either deep water or barge operations. So that automatically eliminated a lot

03:23of places. And then we needed a place where we could have low cost, reliable electricity. So that

03:29also narrows the field. So when you get down to that, then you're looking at a select number of

03:35states. And then there's only a certain number of those states, which are going to have investment

03:38ready sites that can accommodate a project like this. One of the things that we've seen over the

03:43last five years or so is this explosion in mega projects, which are projects that are over a billion

03:49dollars in investment and over a thousand jobs, as well as hyperscale data centers. And that has meant

03:55that our inventory of investment ready industrial sites has been depleted. So when you start to put

04:02all of those three things together, it narrows the universe really quickly.

04:06Didi, what on-shoring type of facility or industry can't happen?

04:14Wow. Well, you got to think that there's a lot of sunk cost in all of the facilities. I think China has

04:19something like $73 trillion worth of industrial investment. So when you make that kind of

04:25investment, you're going to run that until you can't get any more return out of it. That doesn't

04:31mean, so what we're mainly seeing is on-shoring versus reshoring. So it's more about where am I

04:38going to put my next dollar as opposed to am I going to close a facility in one location and open it in

04:43another?

04:44Are you seeing companies also move, or when they build their next plant, choosing the U.S. versus

04:50Mexico or Canada? Like what's the opportunity set there?

04:55So specifically with Mexico, I think that I tend to divide projects into capital intensive versus

05:02labor intensive. And the line that I typically draw there is $1 million invested per job created

05:09is the threshold between labor intensive and capital intensive. So a project like this that's

05:15investing $4 billion and creating 1,000 jobs, that is very capital intensive. And the United States

05:22is set up really, really well for that because our labor costs are more expensive than Mexico,

05:28but our energy costs are much lower. And we also have better reliability. Our regulations are much

05:36more straightforward. Logistics, if you're going to be close to your customer, then your costs are

05:41reduced there. But if it's labor intensive, so let's say it's, you know, $100 million in creating

05:47400 jobs, then Mexico is going to be much more advantageous for these operations. And typically,

05:56we're always looking for a good quality workforce. And logistics can have more or less of an impact,

06:01but more often than not, the labor intensive is going to go to Mexico, capital intensive to the US.

06:07And then in Canada, a lot of it has to do with the energy supplies there, they have an abundant supply

06:12of hydropower, so green energy. So it really just depends on what the criteria of the project are.

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