May ’22 at-a-glance … supply chain

AHRI member survey findings consistent with NAFEM results

A recent survey of Air-Conditioning, Heating, and Refrigeration Institute (AHRI) members found that supply chain issues are profoundly impacting their abilities to successfully conduct business. These results mirror those in NAFEM’s Q1 member survey.

Overall, supply chain issues plague 98 percent of NAFEM respondents and 97 percent of AHRI respondents. “This data informs our 2022 priorities as we work with elected and appointed officials to help mitigate these supply chain concerns so our members can increase the good-paying manufacturing jobs they provide in communities across the country,” said Charlie Souhrada, CFSP, NAFEM’s vice president of regulatory and technical affairs.

Shanghai lockdown worsening supply chain challenges

With Shanghai, home to the world’s largest container port locked down since March 28 due to China’s zero-COVID policy, global supply chain experts are warning of further shipping delays and escalating shipping costs.

According to shipping analytics firm Windward, 20 percent of the world’s roughly 9,000 active container ships are sitting outside congested ports, with nearly 30 percent of these in China. As these ships begin moving, increased congestion is expected at the U.S. ports of Long Angeles and Long Beach, at the same time that contract negotiations are underway with these workers. (See story below.)

Bank of America analysts warned of “adverse supply shock for the global economy,” since China accounts for 18 percent of all U.S. imports and 35 percent of all computers and electronics. With transportation costs accounting for 7.7 percent of global gross domestic product, port delays “typically lead to rising inflation,” according to automation solutions provider Keevlar. The firm also reports that the cost of a single container from China increased from $5,900 in 2021 to $15,764 today.

Experts predict that the full impact of China’s zero-COVID policy will only become apparent in the weeks and months to come.

West coast ports contract negotiations underway

Contract talks between the Pacific Maritime Association (PMA), representing employers at 29 ports along the West Coast, and the International Longshore & Warehouse Union (ILWU), which represents 15,600 dockworkers at those ports, are underway and the stakes are high.

The current contract expires July 1. Shippers are worried that delays in negotiations could add to ongoing supply chain challenges. Workers are concerned about wages and the threat of automation that could reduce jobs. 

In advance of the negotiations, the ILWU posted the following statement on their Twitter feed: “Talks are scheduled to continue on a daily basis in San Francisco until an agreement is reached. The talks are not open to the media or the public. Both sides say they expect cargo to keep moving until an agreement is reached.”

The PMA has a page on their website dedicated to the 2022 negotiations. This includes the latest news, basic information about the negotiations and information about past negotiations.

To make labor slowdowns illegal during contract negotiations, House Republicans introduced the Preventing Labor Union Slowdowns (PLUS) Act of 2022. The proposed bill, which is not expected to pass, also wouldprohibit a labor organization from impeding modernization efforts at a port, or the servicing of any automated vessel.

Ocean Shipping Reform Act (OSRA)

The Ocean Shipping Reform Act (S. 3580/H.R. 4996) passed with overwhelming bipartisan support in both chambers in April. The reforms included in both versions of the OSRA will help address the longstanding, systemic supply chain and port disruption issues which have been further exacerbated by the COVID-19 pandemic, especially strengthening the role of the Federal Maritime Commission (FMC). Differences in the two bills now need to be addressed through a conference negotiation. Last month, the Americans for Free Trade (AFT), sent a letter signed by 91 trade associations, to support and encourage these efforts.