WASHINGTON (August 18, 2022) — U.S. chemical manufacturers reported that major supply chain problems continued well into this year and have worsened in some cases. According to the results of a new survey released by the American Chemistry Council (ACC), transportation-related supply chain problems continued through the first half of this year and resulted in prolonged impacts on U.S. manufacturing operations.
For three consecutive quarters, companies reported that supply chain and freight transportation disruptions harmed their U.S. manufacturing operations. Over that same period companies reported having been negatively impacted by ongoing supply chain and freight transportation disruptions.
In addition to lost manufacturing and customer orders, companies reported that higher shipping rates were compounded by costly workarounds, including increased inventories, investing in additional rail cars, and committing additional resources to managing shipments.
ACC has conducted this survey three times (December 2021, March 2022, and July 2022) to gain a better understanding of supply chain trends and the scale of challenges faced across all transportation modes. Key findings of the survey focused on the second quarter of 2022 include:
- Among respondents, almost all (97%) companies reported modifying operations because of supply chain issues and/or transportation disruptions and delays.
- Most chemical producers (92%) have increased inventories of raw materials/ supplies on hand in response to supply chain challenges. More than half (62%) of respondents have increased inventories of finished products.
- About half of chemical producers (52%) have curtailed production due to inability to ship products to customers and many companies (35%) have had customers cancel orders due to concerns that their order will not arrive or will not arrive on time.
- Transportation costs have increased across all modes of transportation over the past year for nearly all chemical producers.
While chemical producers have seen some improvement in other modes, companies that ship by rail have increasingly reported that railroad delays and service challenges are worse. Nearly all companies (93%) report conditions were either getting worse (46%) or were unchanged (48%).
With freight rail service continuing to decline, almost half of the companies (43%) added tank cars to their fleet because of freight rail service issues.
“Adding tank cars to address freight rail service problems was certainly a costly and less than ideal solution,” said Emily Sanchez, ACC’s Director of Economics and Data Analytics. “Such a large investment demonstrates a lack of confidence that freight rail problems will be solved anytime soon.”
More Action Needed
Policymakers have adopted some concrete measures to help address the ongoing supply chain crisis, but they have not matched the scope and depth of the problem.
There are some positive signs most notably in ocean shipping and trucking where policymakers have taken action, but it’s clear that we still have a long way to go before we turn the corner. That fact is driven home by the continued deterioration of freight rail service and its negative impacts on manufacturing. We need more solutions from policymakers and urge Democrats and Republicans to act without further delay.
Specifically, ACC and other rail customers are calling on Congress to pass the Freight Rail Shipping Fair Market Act and the Surface Transportation Board to adopt regulatory reforms, including reciprocal switching. Furthermore, we urge Congress to pass legislation to improve truck capacity by increasing the Gross Vehicle Weight (GVW) on the Federal Interstates and the Federal Maritime Commission to implement key provisions of the newly adopted Ocean Shipping Reform Act.