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Canada rail strike averted, but ILA action looms

The Canadian rail lockout of union employees that went into effect on Thursday and threatened to disrupt North American logistics lasted only eighteen hours.

Friday’s order by the Minister of Labor ended the lockout and required the start of binding arbitration for the carriers and union. The Teamsters issued a strike announcement soon after but rescinded it once the Industrial Relations Board affirmed the order on Saturday, and operations had resumed by Monday.

Anticipation of the lockout did result in some diversions away from Vancouver which contributed to worsening congestion at some terminals in Tacoma, and a backlog created by the one-day shutdown could take about a week to clear.

Meanwhile, the possibility of an ILA port worker strike in October at East Coast and Gulf ports in the US still looms. Some added urgency to ship goods from Asia in the hope of receiving them before the union contract expires may have contributed some additional upward pressure on spot rates to the East Coast in the last few weeks.  While ocean prices from Asia to N. Europe and the Mediterranean have eased about 8% each from their July peaks, rates to the East Coast have remained at their peak level since mid-July. There are likewise reports of some pull forward of transatlantic volumes ahead of the possible strike, though rates on this lane have remained level.

Prices to the West Coast – which had eased about 20% from their July peak as carriers added capacity to the lane and demand may already be past its peak – climbed by more than 10% last week on mid-month GRIs by some carriers. More reports that carriers are offering some discounted rates relative to spot levels supports skepticism that these or further increases will stick.

If there is a strike in October though, rates to the West Coast would likely increase as shippers shift volumes away from the East Coast and as a backlog of containers and vessels at East Coast and Gulf ports ties up capacity.

In India, a port worker union representing 20,000 members is in last-minute negotiations with port operators to avoid a strike called for tomorrow, which could shut down the country’s twelve largest ports. A strike would create backlogs and congestion even as demand has eased and operations have improved recently, as reflected in some carriers deciding to cancel or reduce planned surcharges.

Logistics operations in Bangladesh, where ports were making progress clearing backlogs caused by the political upheaval in June and July, now face new challenges as devastating floods last week are impacting road logistics and slowing the transport of containers to and from Chittagong.

In air cargo, the US Customs and Border Protection is reportedly increasing its scrutiny and expectations of customs brokers and may tighten reporting requirements for imports entering via the de minimis exception, as it seeks to better regulate the flood of e-commerce shipments from China which arrive mostly by air.

Even with stricter requirements though, most observers expect B2C e-commerce shipments to remain a major factor in air cargo demand and contribute to a strong Q4 peak season for air. Though summer is typically a slow season for air cargo, e-commerce volumes have kept space tight and rates at levels usually reserved for peak season. Freightos Air Index rates out of China were above US$6.00/kg to N. America last week and at about US$3.50/kg to Europe. With rates already elevated, expectations are for even higher prices and tighter capacity when demand increases later in the year.


This article was written by Judah Levine, Head of Research at Freightos 





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