Canadian labor union calls off strike, again, after a day of ‘turmoil’ at West Coast ports

The Spring Breeze bulk carrier freight ship is filled with grain at the Prince Rupert Grain Ltd. terminal of the Port of Prince Rupert in Prince Rupert, British Columbia, Canada.
Bloomberg | Bloomberg | Getty Images
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In a day of back-and-forth moves by the labor union representing workers at Canada’s West Coast ports, the final one made by the International Longshoremen and Warehouse Union was to announce on its Facebook page that it was removing a new strike notice it had announced just a few hours earlier.

That decision came after Canada West Coast longshoremen had first walked off the job Tuesday afternoon when a key union caucus voted down a tentative deal agreed to by the union and port owners last week — since that agreement union workers had been back on the job. And port workers were eventually back to work Wednesday after the Canada Industrial Relations Board ruled the resumption of the strike illegal because no formal strike notice had been posted 72 hours in advance of a work stoppage. The union contended in an official statement that the CIRB was in the wrong, and its original strike notice of July 1 was still in effect and allowed its workers to renew the strike. Nevertheless, the union said it would formally give notice of the strike again.

Then it pulled the new strike notice, with no reason provided. The ILWU said there would be no additional comment.

The on-again, off-again strike has left logistics managers and the world of trade in turmoil as they attempt to assess the situation and make decisions on ocean and rail transport during peak shipping season.

“Managing a global supply chain either as a logistics provider or the beneficial owner of cargo is complex,” said Alan Baer, CEO of OL USA. “Supply chains do not fit into the light switch category where you can simply turn it on and off. Historical cargo volumes demonstrate how volumes moving via the USWC [U.S. West Coast] eroded due to fears about cargo being stuck and or diverted,” he said, referring to labor tensions on the West Coast over the past year that led many shippers to divert business to East Coast ports. “Once changed, not everyone will simply return,” he added.

Canada’s Prime Minister Justin Trudeau convened the Incident Response Group with Labor Minister Seamus O’Reagan, additional ministers, and senior officials to discuss the labor turmoil. Minister O’Reagan had helped broker the tentative deal last week after saying there wasn’t enough of a gap between labor and management for a strike to continue. In a statement on Tuesday night after the ILWU rejected the deal he said, “We should not be here. ... We need our ports operating.”

By Wednesday, O’Regan, who was among Canadian officials who declared the strike over last week, said, “This strike is illegal,” in a tweet.

Rob Ashton, president of the ILWU Canada, initially said in a statement after the voting results of the ILWU Caucus that it did not believe the recommendations had the ability to protect union jobs.

“Our position since day one has been to protect our jurisdiction and this position has not changed. With the record profits that the BCMEA’s member companies have earned over the last few years the employers have not addressed the cost of living issues that our workers have faced over the last couple of years as all workers have.”

But Ashton said in a statement on Wednesday that the union only “suspended picketing at the request of the Minister of Labor,” while it considered the deal. He said the union has followed Canadian labor law which holds that a strike continues from the moment of job action until the ratification of a collective agreement.

The British Columbia Maritime Employers Association, which represents port ownership, provided a statement indicating that the terms of the proposed four-year collective agreement settlement package include a compounded 19.2% wage increase over four years, which would result in the median ILWU income moving from $136,000 to $162,000, not including benefits and pension. “The proposed wage increase is well above industry average standards and yet, ILWU Leadership deemed it not enough ...The proposed deal also provides an 18.5% increase in their M&M retirement lump sum payment in addition to their pension, increased tool allowances, benefits, and pension contributions,” the BCMEA stated.

Logistics managers and trade experts tell CNBC the delays created by the first strike, which lasted 13 days before ending last Thursday, July 13, will be compounded by the second strike.

Steve Lamar, CEO of the American Apparel and Footwear Association, which called on the Canadian government to step in during the first strike, said he is disappointed with the decision by ILWU Canada to go back on strike.

“Getting past these port closures and uncertainty, which is damaging Canadian and American workers, businesses, and consumers, should be job one for the Canadian government,” Lamar said.

His group estimated that the first strike would cause an average 6-8 weeks of supply chain disruption before conditions would return to normal.

The Railway Association of Canada has estimated that it would take three to five days for every day the strike lasted for networks and supply chains to recover. When the first strike ended on its thirteenth day, delays for rail containers were estimated at 39 to 66 days. That does not include the delays in vessels waiting to get processed.

Work stoppage during peak shipping season

Trade delays lead to late fees on cargo containers that shippers pass onto the consumer. The delays also are taking place during peak shipping season, including back-to-school and holiday orders bound for the U.S.

The Ports of Vancouver and Prince Rupert are critical ports for U.S. trade, with 15% of U.S. trade coming into the Port of Vancouver, and 60% of all the containers bound for rail destined for the U.S.

Destine Ozuygur, head of operations at eeSea, said that given this latest supply chain surprise, carriers and terminals are weighing decisions and waiting on more information before taking action. Ocean carriers had moved vessels away from Canada to U.S. ports during the initial 13-day strike.

“Things are once again thrown into turmoil just while teams on the ground are beginning to get their bearings on how the next few weeks will unfold,” Ozuygur said.

In a note to clients, HLS Shipping told clients an accumulation of around 60,000 containers at the Port of Vancouver needs to be cleared, but there is no labor to work on the containers, which will lead to vessel service delays.

The impact of the strike on U.S. rail trade is expected to continue. Weekly rail trade data from the Association of American Railroads on the second full week of the first strike showed a decline of 36.2%. The first week of the strike, there was a decline of 46.2% in U.S.-bound trade year-over-year. Top sectors impacted include forest products such as lumber and wood products, oil and petroleum products, non-metallic minerals such as crushed stone, sand, stone, clay, and glass products, and chemicals.

Canadian rail traffic

As of July 15, 2023

Graphic: Gabriel Cortes / CNBC
Source: American Association of Railroads
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The National Association of Chemical Distributors told CNBC some chemical companies are expected supply chain congestion until October as a result of the strike. Critical chemicals that go into food, cleaning, water purification, and personal care, among many others, flow through the West Coast ports of Canada and down to the United States. Chemical distributors were already seeing significant delays in the movement of products, said Eric Byer, CEO of the NACD, and the second strike will add to what is already “millions of dollars of chemicals” stranded on the water, he said.

“It is imperative that both the BCMEA and ILWU come to an immediate agreement to ensure the stability of a global supply chain that continues to encounter significant operating challenges,” Byer said.

In a statement, Canadian National Railroad said it is concerned about the impact of this renewed work stoppage on the North American economy and on Canada’s reputation as a trading partner. “We will be communicating with our customers to discuss next steps. Our supply chains need reliability, stability, and predictability to function properly. We urge the Government and both parties do whatever is necessary to get goods moving again,” it said.

U.S. West Coast and East Coast ports getting crowded

A combination of vessel cancelations due to global trade weakness and ocean carriers omitting the ports of Vancouver and Prince Rupert because of the labor strife, has contributed to a space crunch at U.S. West Coast and East Coast ports not seen since Covid.

“Space is getting tight to both USWC and USEC, especially from China,” HLS Shipping stated in its client alert. “We now need to pre-book (containers) 4 weeks to secure space with carriers, and for some low-price service, we pre-book 6 weeks for safety.”

August is “peak season” when shippers start to bring in their holiday goods, and container space is also limited by ocean carriers, leading to higher prices. According to space availability monitored by logistics coordinators, the U.S. West Coast route is getting tight as the overall capacity is reduced by ocean carriers, while the U.S. East Coast is still open, but is getting tight with additional canceled sailings in July.

Captain Adil Ashiq, head of North America for MarineTraffic, said the strike will further delay the waiting cargo and further choke the supply chain.

“Vessels who had gone back East to Asia and now returning are once again faced with deja vu on what to do next,” Ashiq said. For companies expecting inbound cargo, he said it is critical for freight forwarders to ensure they have a handle on the current situation and contingency plans are in place for ocean carriers to seek alternative ports to unload cargo.

“Even with trade volumes down this will have a negative impact on the supply chain,” said Paul Brashier, vice president of drayage and intermodal at ITS Logistics. “Product will be delayed. Between the jockeying for vessel space and the associated late container fees that will be tacked onto the containers, the consumer in the end will pay for this,” he said.

In addition to wage increases, the tentative labor deal addressed the union’s concern regarding “contracting out” work and measures to improve training, recruitment, and retention of jobs. The BCMEA also agreed to provide benefit coverage for all casual trades workers, a tool allowance, and a commitment to increase apprentices in the industry by 15%.

​​​​​​​In a statement, the BCMEA said, “Clearly this fair and equitable package wasn’t enough for the ILWU internal leadership, and they chose to instead remain entrenched in their position with little regard to the lives and jobs they are impacting.”

Source: cnbc.com