Updated: Labor-management standoffs could affect shipping sector

Buyers, sellers and traders of recyclables that ship via rail or containership could have faced the prospect of headaches caused by work stoppages in Canada and the United States if it weren't for the actions of Canadian officials.

“The looming labor strikes at Canadian railways and U.S. East and Gulf Coast ports are set to cause significant disruptions to North American supply chains," according to Germany-based shipping and logistics platform Container xChange. "The strikes are expected to create severe operational challenges for the container logistics industry, leading to increased costs for shippers and cargo owners, delays and diversions.”

Some 9,000 workers represented by the International Brotherhood of Teamsters at Canada's two largest freight rail companies, Canadian National (CN) and Canadian Pacific Kansas City Southern (CPKC), reportedly were locked out from their jobs Aug. 22. Negotiators have been unable to agree on key aspects of a new contract, including wage increases, rest break rules and the future affects of automation.

Across the border in the U.S., Container xChange points to workers at several ports on the East Coast and Gulf Coast as preparing for a possible strike. That labor-management disagreement involves the International Longshoremen's Association (ILA) and operators of 36 port facilities that are part of the New Jersey-based U.S. Maritime Alliance, which represents shipping, logistics and warehousing companies operating as far north as New York and New Jersey and down the Atlantic Coast and Gulf Coast to Houston.

“With the looming strikes at Canadian railways and U.S. ports, we may see an immediate uptick in freight rates as market participants brace for significant disruptions,” says Christian Roeloffs, cofounder and CEO of Container xChange.

“In the midterm, we could face increased volatility in freight rates, with potential spikes driven by supply chain bottlenecks and congestion. Shippers and cargo owners should prepare for higher costs and possible delays as the industry adjusts to these challenges.”

While goods including exported nonferrous scrap are shipped in oceangoing containers, Canada and the U.S. trade numerous bulk commodities via rail, including ferrous scrap and old corrugated containers (OCC).

Thursday, the Washington-based Recycled Materials Association (ReMA) sent an alert to members that “a lockout could significantly impact the North American manufacturing economy, as nearly one-third of freight handled by these two railroads cross the U.S.-Canadian border. CPKC stopped accepting new cross-border shipments earlier this week on Tuesday.”

According to the trade group, Canada is the largest export market for U.S. recycled materials, with over $5 billion in U.S. exports of recycled products going to Canada in 2023.

"So, a long-term rail shutdown could significantly impact U.S. recyclers and manufacturing supply chains,” ReMA says.

The rail-related disruption might not turn into a prolonged situation, with Canada’s government indicating late this week it intends to force an arbitration process onto the two freight companies and the Teamsters.

“It is my assessment that the parties are at a fundamental impasse,” Canadian Minister of Labour Steven MacKinnon says. “Therefore, it is my duty and responsibility to invoke my authorities under the Canada Labour Code to secure industrial peace and deliver the short- and long-term solutions that are in the national interest.”

On the ocean vessel side, Container xChange says shipping firms and their customers are making contingency plans. The firm says Hamburg-based Hapag-Lloyd has announced that for imports to North America, a diversion fee of $350 per bill of lading will apply for containers on water destined for Canadian ports but with inland delivery in the U.S.

The company also is advising customers to explore alternative trucking options for deliveries within Canada and has encouraged exporters to consider U.S. ports of loading as a precaution.

France-based ship operator CMA CGM has issued a notice detailing several measures, including potential rerouting of vessels to U.S. ports and restrictions on rail shipments.

“The company has also implemented embargoes on specific intermodal shipments, including hazardous materials and temperature-controlled containers, across their network,” Container xChange says.

According to the report, the Port of Vancouver in western Canada handles a large share of Canada’s international trade and relies heavily on rail connections. About two-thirds of all cargo volumes at the Port of Vancouver are moved by rail, and this includes containerized goods.

With 90 percent of Canada’s international exports moving by rail, any work stoppage would cause “severe delays, increase costs and create congestion at terminals," Container xChange says.

"The container logistics sector could face reduced capacity, higher freight rates and challenges in meeting delivery timelines, affecting everything from daily operations to long-term trade agreements.”

However, late Aug. 22, the Canadian government intervened in the dispute effectively ending the lockout after less than a day. Officials have asked the Canada Industrial Relations Board (CIRB) to impose binding arbitration in the labor negotiations.

Workers at CN returned to work Aug. 23, according to news reports, while the work stoppage at CPKC continues pending an order from the Canadian Industrial Relations Board following a meeting with the union and company officials Aug. 23.

In an Aug. 23 alert to members, ReMA says the Canadian government anticipates operations will resume fully in the next several days, though ripple effects of the shutdown likely will continue for several more weeks.

If strikes at the U.S. ports materialize later this year, the movement of goods through these ports could be severely impacted, leading to delays and congestion during the peak season when retailers are stocking up for the holidays, says Container xChange.

In one bit of better news for recyclables traders that ship materials to China, Container xChange says the port of Ningbo in that nation has resumed operations after an explosion on an anchored vessel closed down that port for several days. According to the German company, the port resumed full operations Aug. 12, three days after the explosion.

*This item was updated Aug. 23 to add information about Canadian Minister of Labour Steven MacKinnon's intervention in the matter.