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Finding more bang for the U.S. buck in 2008
By Scott Miller
Staff Writer
Bob Whitten hopes to see his company’s exports increase to 5% this year by leveraging the weak U.S. dollar against foreign markets.
His company, Showa Denko Carbon Inc., which manufactures synthetic graphite in Ridgeville, isn’t alone.
The president and CEO said like many exporters and foreign investors, he sees an opportunity in currency exchange rates that are expected to continue favoring the euro and pound in 2008.
“You can sell your product for a cheaper price on the overseas market but get the same dollars back,” Whitten said of the U.S. dollar’s weakness against the euro.
The dollar remains weak and could decline further this year. Just before the new year, the euro was trading at $1.4356, while the pound was valued at $1.9810.
Along with other factors, the Federal Reserve’s decision to lower interest rates helped reduce the value of the dollar compared to the euro because the European Central Bank has held interest rates steady.
U.S. currency is no longer in demand on world markets. Foreign banks invest in the euro or the pound, no longer the dollar. That means more dollars idling in currency markets, further depleting the value of a buck.
Perhaps the dollar’s weakness is most painfully obvious at the pump, where drivers pay nearly $3 a gallon for gas. Crude is traded globally based on the value of the dollar. A weakened dollar creates a high price for oil.
But a weak dollar does have benefits.
Foreign investors, for example, cast their eyes on the states.
“We’re seeing an increase in investment in the state coming from both Europe and Canada,” said Jack Ellenberg, deputy secretary for new investment at the S.C. Department of Commerce.
“We’re seeing a big interest from companies that don’t currently have operations in the U.S.,” he said. “We also see companies that are sourcing goods here and sending them back
overseas.”
Foreign capital investment has increased steadily in South Carolina, from $571.51 million in 2003 to $924.72 million in 2006, according to the commerce department. Those figures do not include investments the commerce department did not help attract.
Germany has led the charge through those years, but South Carolina has seen significant investment from China, Japan, Italy, France and many other European companies.
Most recently, the commerce department took aim at Canada, as the Canadian dollar reached parity with the U.S. dollar for the first time since 1976.
Without being specific, Ellenberg said he expects to make an announcement regarding a Canadian company in the not-too-distant future.
“This is a good time to invest in the U.S.,” Ellenberg said.
Now is a good time to travel to the U.S. too. While Americans may not want to travel to Paris and pay $7 for a cup of coffee, Europeans find good deals traveling to America.
“America really is a bargain,” said Perrin Lawson, deputy director of the Charleston Area Convention & Visitors Bureau. “The thing about international travelers is they typically stay a lot longer and spend a lot more money.”
The bureau sees more and more travelers from the United Kingdom, Ireland and Germany, so Lawson intends to increase his advertising presence in those countries.
The influx is great for local restaurateurs and hoteliers, he said.
Ultimately, though, it’s hard to ignore the dollar’s influence on the price of oil, effectively boosting the cost of petroleum products. Airlines pay more for jet fuel; ticket prices increase.
Truckers pay more for diesel fuel; the cost of goods and services of all kinds rises. Heating oils become more expensive. Propane costs more.
Like everyone else, Whitten pays a lot more for fuel, but he’s running a major factory with petroleum, not just filling up his vehicle. So he’d like to see the dollar get a bit stronger to help drive down the cost of crude.
“But so far it has been a positive for us,” he said of the dollar’s decline. “Our raw materials are going up, but fortunately for us, all of our materials are generated in the United States.
We’re comfortable with a weaker dollar because it protects our business.”
Still, Whitten is faced with a dilemma: The plant is running at capacity, and an expansion is too costly at this point. Many of Showa Denko’s customers are based in the United States, so he can’t start shipping more product overseas.
“I’m not going to abandon our U.S. customer for a temporary benefit in foreign markets,” he said.
Scott Miller is a staff writer for the Business Journal. E-mail him at smiller@setcommedia.com.
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