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We can finally buy toilet paper and cleaning supplies, but getting on with our lives after a disrupted 2020 has proven to be easier said than done. It seems like every day another product is missing from store shelves or on backorder from distributers. The items are random and disconnected—cars, refrigerators, fuel, windows, men’s brown socks, Tecate beer, ink cartridges, vitamins, ketchup, and the list goes on. Suddenly, we’re mystified that we can’t find a matching washer and dryer, electric bike parts or hamburgers for a family cookout. The HVAC industry is no exception. Parts and equipment are often backordered, which can be very frustrating for the customer, especially during the blistering summer we had this year. Refrigerant (namely R22) is very hard to come by and is being rationed by the distributors. What’s worse—due to the shortage and high demand, the price of refrigerant has tripled in the past six months. There are a few reasons this is happening. We might call it a perfect storm of reasons.

Trade Wars

The semiconductor microchips—the brains behind our cars, laptops, smart appliances, and smart phones—have been in short supply for a few years now. Before Covid was even a word we all used, tensions between the US and China erupted into a trade war as the US applied tariffs to the raw materials used to make the chips. At about the same time, a trade war between Japan and Korea further disrupted the supply of raw materials. Then fires broke out at two different Japanese chip manufacturers, causing customers to panic and begin hoarding the chips to avoid further disruption in their supply chains.1

Pandemic Fallout

When the pandemic was announced, factories both here and overseas had to shut down. These lockdowns affected the production of raw materials like plastic, lumber, aluminum, copper; parts like the computer chips, the cans that contain beverages, and the parts for electric bikes; and finished products like printer ink, refrigerators, and cars. Eventually, factories re-opened under Covid-safe policies. But fewer workers means lower output for manufacturing, inadequate shipping and trucking, and the inability to stock the shelves. At the same time, the demand for products increased. Work from home became a thing, so we bought all the laptops, inkjets, and decent routers. Schools bought all the Chromebooks. Since life changed, habits changed. Families wore their appliances down quicker. Now there are no appliances in stock. They added pools to their backyards. Now there’s a pool liner shortage and a chlorine shortage. They started camping and trail riding. Now there’s a tent shortage and a shortage of reasonably priced bikes.

Transport Gridlock

On top of this outsized demand is what can only be described as a shipping mess. Since just-in-time shipping became popular in the seventies, the shipping supply chain has been perfectly calibrated to deliver goods from across the world within a week. But uneven recovery all over the world threw the supply line out of alignment. Add to this the gigantic cargo ship that wedged itself in the Suez Canal last summer and threw a six-day-long monkey wrench into a supply chain that was already stressed. This has caused what’s being called a shipping container shortage. In fact, there are enough shipping containers, they’re just not in the right places.2 Shipping port with cargo ships docked and stacks of shipping containers. Arial view of long lines of trucks. Once a shipping container filled with products arrives on our shores—delayed, because of traffic jams coming into our ports—it is transported to its final location by semi-truck or by rail to semi. However, the U.S. is short about 50,000 truck drivers. As an interesting side note, about 55,000 truck drivers have been barred from the profession since 2020, when new substance-use laws went into effect.3 This shortage means things will take even longer to reach the destination. It also means they will cost more. The rate for shipping a container from China to the US is usually between $2,000 and $3,000 USD. As of August 2021, list prices have skyrocketed to $20,000, with some quotes reaching as high as $32,000.4 Now that everything is back up and running, companies can’t catch up, let alone keep up with demand. Auto manufacturers have halted production on some models as they wait for the chips to arrive. HVAC companies are waiting for air conditioners; contractors are waiting for windows. Paint companies are waiting for containers. Breweries are waiting for cans. Office Depot is waiting for certain printer ink. (Though of course there’s the option of paying $125 per cartridge on eBay.)

Pandemic 2.0

Enter the delta variant. In June, China’s zero tolerance Covid policy shut down the fourth busiest port in the world due to an outbreak in a nearby city. It took a month to return to normal operations. In August, Chinese officials closed a portion of the third busiest port in the world after one employee tested positive. Ships had to be rerouted to other already-congested ports, exacerbating the delays in the supply chain. Experts say many shortages will not be resolved this year. In fact, shortages may persist well into 2022.5

A Lesson

This point in history has taught us so many things—that we are all connected, that the world is much smaller than it would appear, and that we take most of our modern-day conveniences for granted. But perhaps there is something even more important for us to learn—a skill we’ll be able to use for the rest of our lives? Patience.

Sources

1. Cheng Ting-Fang and Lauly Li, “How the Chip Shortage Got So Bad and Why it’s so Hard to Fix,” NIKKEI Asia Business Spotlight. April 16, 2021. https://asia.nikkei.com/Business/Business-Spotlight/How-the-chip-shortage-got-so-bad-and-why-it-s-so-hard-to-fix 2. Gavin van Marle, “There Are Enough Containers for Global Trade—They’re Just in the Wrong Places,” The Load Star, April 27, 2021. https://theloadstar.com/there-are-enough-containers-for-global-trade-theyre-just-in-the-wrong-places/ 3. Chris Isidore, “Coming This Summer: Gas Stations Running Out of Gas,” CNN Business, April 27, 2021. https://www.cnn.com/2021/04/27/business/summer-gasoline-shortage/index.html 4. Roslan Khasawneh and Muyu Xu, “China-U.S. Container Shipping Rates Sail Past $20,000 to Record,” Reuters, August 5, 2021. https://www.reuters.com/business/china-us-container-shipping-rates-sail-past-20000-record-2021-08-05/ 5. Jordan Valinsky, “Here’s Everything You Can’t Get Right Now,” CNN Business, July 31, 2021. https://www.cnn.com/2021/07/31/business/supply-chain-shortages-pandemic-july-2021/index.html

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