White House moves to aid struggling supply chains

  • Market: Agriculture, Biofuels, Chemicals, Coal, Crude oil, Fertilizers, Metals, Oil products, Petrochemicals, Petroleum coke
  • 25/02/22

The White House has issued new steps toward revitalizing strained supply chains, including adding resilience to freight networks and manufacturing operations.

"Outdated infrastructure and the Covid-19 pandemic have strained the capacity of the entire goods movement supply chain, resulting in unprecedented snarls in global freight and logistics supply chains," the White House said yesterday as it laid out a number of steps to build long-term resilience to supply chain networks.

Among the measures, the US Department of Transportation (DOT) has created a $450mn grant program focused on US ports. Money will go towards making infrastructure upgrades, constructing new berths, restoring docks and extending rail lines. The money was authorized under the bipartisan infrastructure law, signed into law last November.

DOT is also continuing its efforts at recruiting more truck drivers and improving the quality of existing jobs to help offset the sector's low retention rate. DOT is working with the Labor Department to develop a pilot training program for truck drivers between the ages of 18-21.

Even before expected supply chain problems that are likely to result from this week's Russian invasion of Ukraine, the White House had been working to resolve transportation delays.

The White House since early last year has been targeting the situation, prompted by snarled supply chains as producers have been unable to keep up with rebounding demand in the wake of the initial Covid-19-induced slump.

The White House in June 2021 identified a number of weaknesses in the supply chain, including insufficient US manufacturing capacity; misaligned incentives in private markets; industrial policies adopted by other nations; geographic concentration in global sourcing; and limited international coordination.

Energy focus

Also in the latest package of measures, the Department of Energy (DOE) is taking a number of steps to strengthen supply chains with a focus on domestic production of energy products.

Demand for products such as wind turbines and batteries for electric vehicles has increased, and the US, without new domestic raw materials production and added manufacturing capacity, is vulnerable to imports, DOE said.

DOE is moving forward with the creation of four regional clean energy hydrogen hubs, funded by $8bn in last year's infrastructure law. The department has issued requests for information that it will use to guide development.

DOE is also releasing $44mn to its Mining Innovations for Negative Emissions Resource Recovery program, which is aimed at developing a net-zero method of increasing domestic supplies of critical elements needed for clean energy projects, including copper, nickel, lithium, cobalt and rare earth elements.

A new manufacturing and energy supply chains office is being established within DOE, focusing on strengthening and securing the flow of materials needed to support development of clean energy infrastructure.

Other federal supply chain efforts will focus on boosting exports of goods made in the US. The Export-Import Bank will consider prioritizing access to capital for "environmentally beneficial" small businesses as well as companies exporting renewable energy and energy storage products, semiconductors, biotechnology and biomedical products.

The White House Office of Management and Budget will soon issue a new Buy American rule aimed at creating a steady source of demand for domestically produced critical goods. The rule will establish a new category of critical products that will be eligible for enhanced price preferences. The White House did not identify those products.

And to address global supply chain resilience, the White House later this year will host a ministerial-level summit on global supply chain resilience. The US, Mexico and Canada will also meet this summer to explore opportunities to improve the North American supply chain.

Latest concerns

The latest measures have raised some concerns. A White House report on its efforts to resolve supply chain problems raises "concerns that powerful special interests are coopting logistics challenges created by the pandemic to obtain below-market rates and pad their own profit lines," the Association of American Railroads (AAR) said.

The group warned that recommendations of some new and revised regulations are "at direct odds" with the goal of increasing freight fluidity and would divert freight away from railroads.

AAR is concerned a proposal to allow reciprocal switching that is under review by the Surface Transportation Board (STB) "would create inefficiencies, inhibit investment and, in turn, make rail transportation less competitive."

President Joe Biden last year signed an executive order urging federal rail and seaborne shipping regulators to increase industry competition and urged STB to act on its long-standing switching proposal.

Enduring issues

Shippers have complained for more than a year about the inability of freight transporters to meet the surge in demand. Coal shippers, in the midst of a rare increase in demand for the industry, have tried to put more trains into service but say railroads have refused.

The drivers of these problems are myriad, but intermodal congestion is getting much of the attention. Storage of containers at coastal ports rose sharply last year amid rising imports, though numbers have dropped because of industry efforts to resolve the situation.

Federal efforts to resolve issues have so far included intervening directly with major US ports to speed the delivery of containers, a large part of transportation congestion.


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