U.S. port and Canadian rail strikes threaten North

Impending strikes by Canadian railroads and ports along the U.S. East and Gulf Coast will severely disrupt North American supply chains. The strikes are expected to create severe operational challenges for the container logistics industry, leading to increased costs, delays and rerouting for shippers and cargo owners.

Also read: Canadian rail strike looms as unions and rail operators reach stalemate

If no agreement is reached by August 22, strikes will begin, targeting key areas such as automation and pay increases.

“Given our continued forecast of inventory builds, we expect freight rates to likely decline in the near term. However, with strikes looming at Canadian railroads and U.S. ports, we could see an immediate increase in freight rates as market participants prepare for significant disruptions. This is a common response to potential disruptions, as uncertainty drives up costs.” Christian Roeloffs, Co-founder and CEO, Container xChangean online marketplace for container trading and leasing based in Hamburg, Germany.

“In the medium term, we are likely to face increased freight rate volatility, with supply chain bottlenecks and congestion likely to cause freight rates to spike. Shippers and cargo owners should prepare for higher costs and possible delays as the industry adapts to these challenges,” Roeloffs added.

As the industry braces for a strike, companies have begun developing contingency plans. Hapag-Lloyd, a major player in the container shipping industry, has announced measures to mitigate the impact of the strike on customers. For imports into North America, a $350 transhipment fee will be charged per bill of lading if the container is shipped on the water and is destined for a Canadian port but delivered inland in the United States. The company also recommends that customers explore alternative trucking options for delivery within Canada and encourages exporters to consider U.S. ports of shipment as a precaution. These proactive measures highlight the significant operational disruption that a strike could cause.

CMA CGM issued a notice detailing a number of measures, including the potential rerouting of vessels to U.S. ports and restrictions on rail shipments. The company also implemented a ban on certain intermodal cargoes, including hazardous materials and temperature-controlled containers, across its network.

Rail is a key part of the logistics chain that moves containers from inland areas to ports and vice versa. In Canada, rail carries a large portion of container traffic, especially long-distance shipments across the country. For example, the Port of Vancouver carries the majority of Canada’s international trade and relies heavily on rail connections. About two-thirds of the Port of Vancouver’s freight volume is transported by rail, including containerized cargo.

U.S. ports, particularly along the East Coast and Gulf Coast, are bracing for similar challenges. If a strike were to occur, cargo movement through those ports could be severely disrupted, causing delays and congestion as retailers stock up during the holiday season.

“Possible simultaneous strikes at U.S. ports and Canadian railroads are a perfect storm for North American trade” Roelofs infer.

Rail and ports are critical to North America’s logistics chain, and any disruptions would increase costs and cause significant delays. Two-thirds of the Port of Vancouver’s cargo volume moves by rail, including 90% of international exports, and any downtime would cause significant delays, increase costs and cause congestion at the terminals. The container logistics industry could face challenges from reduced capacity, higher freight rates and the inability to deliver on time, impacting everything from daily operations to long-term trade agreements.

A potential rail strike in Canada could have major knock-on effects on exports and imports, disrupting trade not only within Canada but also with its major trading partners.

Many of Canada’s major exports, such as grain, potash, coal and manufactured goods, are transported by rail to ports and then shipped overseas. A rail strike would disrupt the flow of these goods, causing export delays and potentially causing port congestion due to container backlogs. Similarly, imported goods arriving at Canadian ports are often distributed across the country by rail. A strike could delay the arrival of these goods at their final destinations, causing supply chain bottlenecks and increasing costs for businesses.

This could result in increased costs for businesses and consumers in Canada and in trading countries due to cargo delays or rerouting.

Container xChange urges businesses to stay informed and proactively manage logistics strategies to minimize the impact of these potential disruptions.