WINTER 2023

104 THE DISTRIBUTOR’S

104 THE DISTRIBUTOR’S LINK CHRIS DONNELL WE LIVE IN AN INTERESTING TIME from page 28 The East Coast is something different entirely. For the past 6 months many of the ports on the East Coast have suffered through building congestion, equipment shortages, and increasing accessorial fees. To put things in perspective, month after month and year after year the ocean terminals in Los Angeles are the busiest nationwide; however, in July through October, that title went to the Port of New York which is usually third on the list. Savannah and Houston saw record imports for the year and this rise in throughput is attributed to the fear of the potential port strike back in June and July. With that said, there are many other things that happened: logistics disruptions, extended lead times, the continued Covid situation, escalating rail and port conditions, and the shortage of truckers nationwide. It has been three years of hell and we are not out of the woods yet. There are four things that are hanging in the balance, could derail any positive momentum we have gained, and send us right back to the logistics abyss. The first issue and one I think people aren’t paying as close attention to, is the current situation regarding the rail. As of today, December 1st, , 4 unions have openly rejected the tentative agreement from mid-September. These four unions represent about 50% of the total union workers and they have collectively decided that December 9th will be the end of their “cooling off” period which could lead to a strike. Any disruptions from the rail would cripple most, if not all, industries as the US relies heavily on trains to move goods such as food, machinery, cars and fuel. When you take into account that 30 million people work on the rail, and use it for transport for work and vacations, this would be a blow most can’t conceptualize. If a strike happens, you can expect the ocean carriers to suspend any inland or rail movements, forcing companies nationwide to look at alternative means to move cargo such as transloading - but at that point, it might be too late. There is a sliver of hope as Joe Biden is pushing for legislation to immediately pass in order to avert a strike. A strike could cost hundreds of thousands their jobs and communities across America the ability to keep industries open. Over the past several weeks this situation has become more mainstream as the media is running updates on a regular basis. The second issue involves the West Coast port situation. While information regarding the on-going contract negotiations have been kept under wraps, there are cracks forming on what was once believed to be a strong partnership between the ILWU and the PMA. It started with the PMA bringing in an off-site union to handle the cold-ironing (hooking up steamship line to electricity once the vessel is at dock). This was something the ILWU handled for years and they look at it as a breach of trust and contract. The PMA countered the accusations claiming the ILWU has been purposefully working slower after the contracts expired July 1st. In an independent study, no work stoppage or slowdown has been evident, but again, that hasn’t stopped the PMA. Then, in mid-October, out of a sign of frustration, the ILWU coordinated a strike of the port of Oakland and while it only lasted one day, the impact sent a shockwave through the industry. People started to look at the situation as more serious than what was expected. The third issue, one that has recently raised its ugly head once again in China, is the Pandemic. With a country that relies on China for the bulk of imports, this is something everyone needs to keep an eye on. China still has their zero Covid mandate and with the newest strain of the virus, we’re seeing issues in most major cities throughout China. Places like Tianjin, Hong Kong and Guangzhou have made the news lately due to Covid and the country’s frustration with being constrained for the past 3 years. With rampant protests demanding an end to the mandate and the removal of the current leading body, it’s shaping up to be a troubling time, especially with an early start to Chinese New Year. If closings persist, look for the delays in manufacturing and leads times to extend exponentially. The last issue - which is currently taking hold more so in the North-East - is the current status of our diesel fuel reserves. While there are many rumors and misconceptions on this topic, it is something that needs to be on everyone’s radar. First, let me set the record straight. Our diesel fuel levels are categorically low, however, the current level of 24 billion barrels doesn’t mark the lowest point ever. CONTINUED ON PAGE 105

THE DISTRIBUTOR’S LINK 105 CHRIS DONNELL WE LIVE IN AN INTERESTING TIME from page 104 The current level has been hit multiple times over the past 40 years. However, with our current administration curbing drilling and processing of oil in the continental US, and with the current war between the Ukraine and Russia, the strain has caused our fuel levels to take a steep dive compared to where we were 3 to 4 years ago. We are exporting a large amount of heating oil and fuel to Europe and other countries. Because of this we’ve been more reliant on other oil producing countries. This leaves us with a potential shortage, but the question remains: how bad is it? This issue is already impacting the North-East as they are rationing heating oil, diesel fuel and others items which results in costs skyrocketing. The national average for diesel fuel is well over .00 per gallon and some states have seen diesel fuel eclipse .00. The direct impact is fuel costs from trucking companies - they are holding strong even with the tendered costs per pound going down. Most who utilize trucking as a form of distribution haven’t seen the true drop in costs due to the inflated fuel costs. In the big picture, with the vast majority of cargo moving by truck, some 80% of all cargo could see significant increases due to something as simple as fuel. In short, every industry will be affected and the consumers could see shortages of food, chemicals and other everyday items. Are we really going back to things like shortages of toilet paper? We realistically could, but only time will tell. Now I purposely decided not to mention things like inflation, the continued war in Europe, the shortage of qualified truckers, or the current trade war with China as these situations are here for the long haul, no pun intended. While we’ve made massive strides in our global supply chain issues, there are still many things that could derail it. I’m also afraid that people have become comfortable with the new changes and won’t take the necessary precautions to safe guard from falling into the same disruptions we saw a year ago. CHRIS DONNELL