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SCA Weekly Report | June 13-17, 2022
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SCA Industry Impacts Survey
At the SCA 2022 Winter Meeting, the Industry Partners Committee recommended, and the SCA Board of Directors approved, a survey to solicit input from SCA members on the various impacts on the shipyard industrial base including resulting lingering COVID issues, supply chain disruptions, inflationary costs and federal budget uncertainty, among other industry concerns.
Member participation in this survey is critical to conveying these adverse impacts on shipbuilding, ship repairing, and the businesses that support and supply the shipyard industry. The results of the survey will be aggregated industry data points to assist SCA's efforts to advocate for the shipyard industrial base to the Pentagon, Administration, and Congress.
The survey should not take any longer than 5-10 minutes to complete, and all results will be blinded and aggregated. This means that all company information will remain anonymous and only viewed by the SCA team.
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New OSHA Heat Illness Prevention Website
OSHA’s revised Heat Illness Prevention campaign webpage has resources on heat illness prevention and first aid, employer responsibility to protect workers from heat, and information for workers who work in hot and humid conditions. These resources include a poster, pamphlet, PSAs, videos, and infographics on how to keep workers safe from heat.
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Gasoline Prices and Jones Act Waivers
Earlier this week, President Biden sent a letter to the major oil refiners asking them what they could do to adjust gasoline prices. ExxonMobil issued a public response where, among other things, the company said waivers of the Jones Act would be helpful. The Senate Commerce Committee is expected to mark up the FY23 MARAD Authorization bill next week and this will heighten the debate about the Jones Act both at that hearing and in the general discourse.
According to the full Reuters article, Biden said the industry's lack of action is blunting the administration's attempts to offset the impact of oil-rich Russia's invasion of Ukraine, such as releases from the U.S. oil reserves and adding more cheaper ethanol to gasoline.
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SASC Completes Markup of FY23 NDAA
In a closed session this week, the Senate Armed Services Committee (SASC) voted 23-3 to advance the National Defense Authorization Act (NDAA) for Fiscal Year 2023. During the subcommittee and full committee markups of the legislation, the Committee considered 433 amendments and adopted 223 bipartisan amendments. The bill now heads to the Senate floor for consideration.
For the second year in a row, the committee almost unanimously voted to approve an amendment that would boost the defense budget. The amendment increased the national defense topline by $45 billion, including $20 billion to alleviate the effects of inflation and $25 billion to advance implementation of the National Defense Strategy. Biden’s budget requested a total $813 billion for national security programs in 2023; the Armed Services panel covers about $803 billion of that total. The bill’s topline authorization would rise to $847 billion, according to SASC Chairman Jack Reed (D-RI). Total national defense spending would be $857.6 billion if the Senate proposal makes it through Congress and becomes law.
According to an executive summary released by the committee, the mark, Authorizes the procurement of eight battle force ships: two Arleigh Burke-class destroyers; two Virginia-class submarines; one Constellation-class frigate; one San Antonio-class amphibious ship; one John Lewis-class oiler; and one Navajo-class towing, salvage and rescue ship. A full SCA summary of the bill will be available following the release of the Committee’s mark. Additionally, lawmakers agreed to authorize multiyear or block-buy contracts for as many as 15 Arleigh Burke-class destroyers, 10 ship-to-shore connectors, and eight Lewis-class oilers and would prohibit the retirement of 12 of the proposed 24 ships for decommissioning.
House Armed Services Committee Releases FY23 NDAA Chairman’s Mark
The draft proposal from the House Armed Services Committee stays close to President Joe Biden’s request of $773 billion for the Pentagon. It authorizes $802 billion for national defense programs, $772.4 billion for military, and doesn’t make any significant changes to major weapons programs. A debate over increasing authorization for Pentagon spending will be discussed when the full committee meets on June 22.
Rep. Adam Smith (D-Wash.), the chairman of the House Armed Services Committee, told reporters Wednesday he was confident that defense budget limits could be increased by the time Congress passes the relevant authorization and spending bills. A copy of the chairman’s mark can be found HERE.
House Appropriations Subcommittee Marks Up Defense Spending Bill
Without a bicameral spending agreement on topline numbers, the House Defense Appropriations Subcommittee marked up the FY23 defense spending bill in closed session this week. House appropriators largely met the Biden administration’s request, allotting $762 billion in defense spending. The bill would allot $27.8 billion for the Navy to buy the eight ships it asked for in the FY 2023 request, including two Virginia-class attack submarines, two Arleigh Burke-class destroyers, one Constellation-class frigate, one San Antonio-class amphibious transport dock, one T-AO-205 John Lewis-class oiler and one T-ATS 6 Navajo-class towing, salvage and rescue ships.
The bill, found HERE, will be marked up by the full Appropriations Committee next week. House appropriators want the Navy to keep five Littoral Combat Ships but will allow the service to decommission four; the legislation would complicate the Navy’s plans to decommission nine Freedom-class Littoral Combat Ships next year.
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Viking Life Saving Establishes Safety Hub for U.S. Offshore Wind
Viking Life-Saving Equipment has selected Norfolk, VA, as its hub to support the safety needs of North America’s fast-emerging offshore wind sector. Viking, a safety solutions provider for the global maritime and offshore industries will coordinate delivery, service and lease agreements for sector-specific PPE and other gear from offices in Norfolk.
Viking has progressively enhanced its range of marine evacuation systems (MES), work suits, immersion suits, lifejackets, and other life-saving equipment for offshore wind technicians, and today supports safety needs across some of the largest wind turbine developments in the world. It has also developed flexible leasing and equipment exchange packages to suit contractors in the fast-growing market.
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China Launches 3rd Aircraft Carrier
China launched its third and most modern aircraft carrier, a watershed moment for President Xi Jinping’s efforts to modernize the armed forces and narrow his country’s military gap with the US.
The new carrier, christened the Fujian, was launched from Jiangnan Shipyard near Shanghai on Friday at ceremony attended by military and civilian leaders, state broadcaster China Central Television said. The ship has an electromagnet catapult launch system -- a feature previously deployed by only the US -- rather than the “ski jump” deck of China’s two earlier carriers, CCTV said.
While the Fujian will more closely resemble the newest US carrier, the USS Gerald R. Ford, it will likely fall short of Nimitz-or Ford-class nuclear-powered supercarriers in capabilities and range. The Chinese warship is expected to have a diesel engine and likely to be comparable in size to the US Kitty Hawk-class carriers, which the US operated from the 1960s to 2000s.
The Fujian, which was previously known as the Type 003, will displace about 80,000 tons, according to CCTV, compared with about 100,000 tons for the Nimitz and Ford carriers. The shipyard working on the new carrier is operated by Jiangnan Shipbuilding Group, a subsidiary of China State Shipbuilding Corp., the world’s largest commercial shipbuilder.
Once the warship set sail, it would need five years to reach initial operational capabilities to thoroughly test all of its satellite communications, drainage system and other equipment on board, Zhou Chenming, a researcher at the Yuan Wang military science and technology think tank in Beijing, told the South China Morning Post.
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Gas Prices Present Glaring Problem for Biden
Skyrocketing gas prices are a glaring problem for the White House with no clear, immediate solution. While the administration began the month by pivoting heavily toward its economic message, political watchers say the attempt has so far fallen flat, especially as the national average for a gallon of gas hits a record $5. That, along with inflation, presents a major political challenge for Biden and Democrats going into the midterms. Eighty-five percent of voters said they think inflation is a very serious or somewhat serious problem, according to an Economist-YouGov poll from earlier this month. In the same poll, 44 percent of respondents said Biden has “a lot” of responsibility for the inflation rate and 31 percent said he has “some.”
Energy Secretary Jennifer Granholm told CBS News this week that Americans should brace for a rough summer, predicting fuel prices may not come down to less than $4 per gallon until the fall or winter. “There will be some relief on the horizon, but during the summer driving season, it is going to be rough, no doubt about it, because we have such a demand and supply mismatch on the global market for oil,” Granholm said.
Biden to Sign Ocean Shipping Reform Bill After Congress Approves Legislation
The U.S. House of Representatives approved legislation on Monday to improve the oversight of ocean shipping, which supporters say will help curb inflation and ease export backlogs. The bill was approved 369-42 and will head to the White House for President Joe Biden's signature. Biden said in a statement he looked forward to signing it into law.
The bill would boost the investigatory authority of the Federal Maritime Commission (FMC), the U.S. agency that oversees ocean shipping, and increase industry transparency. Senator Maria Cantwell said the bill gives the FMC "the tools it needs to cut down on extraneous shipping costs and stop shipping carriers from leaving American products like apples, hay, milk and potatoes behind."
Scrubber-Fitted Ships See Huge Savings as Fuel Spread Widens
Ship-owners that invested in pollution-reducing equipment to let them burn dirtier fuel are enjoying massive discounts due to a supply glut. Owners of vessels who installed so-called scrubbers are buying high-sulfur fuel oil (HSFO) at a discount of more than $500 a ton in Asia, compared with cleaner varieties. The collapse in HSFO prices has been partially driven by increased Russian flows, according to traders. The cost of very-low sulfur fuel oil, meanwhile, has surged as more of its feedstock gets refined into gasoline.
About 8% of the global shipping fleet currently use the scrubbers, which remove pollutants from emissions, according to Drewry Maritime Services. Vessels have been required to use fuel with a sulfur content of 0.5% or less since 2020, under International Maritime Organization rules. Those with scrubbers can run on HSFO, which typically has a sulfur content of at least 2% to 3%.
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If you have any questions, please do not hesitate to contact the SCA staff.
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