Longshore Union Members Ratify Agreement, Ending Weeks of Trade Congestion
Members of the International Longshore and Warehouse Union (ILWU) of Canada have voted to ratify the second tentative agreement with West Coast port ownership. This decision brings an end to the uncertainty and trade congestion that has affected the supply chain since the dock workers first went on strike.
According to ILWU President Rob Ashton, 74.66% of members voted in favor of accepting the terms of the tentative agreement.
The revised second tentative deal was announced by ILWU Canada and the British Columbia Maritime Employers Association (BCMEA) after the union members rejected the original deal proposal. The Canada Industrial Relations Board mediated the agreement. The union was directed to hold a vote by the country’s industrial relations board.
The new agreement includes increases in wages, benefits, and training, as stated by the BCMEA. However, specific details were not provided.
The original rejected deal proposed a 19.2% increase in compounded wages over four years, along with a signing bonus of $1.48 per hour per employee, totaling approximately $3,000 per full-time worker. Additionally, there was an 18.5% increase in the retirement payout.
The union argued that worker salaries were unsustainable due to rising inflation, while the BCMEA countered that longshore wages had already increased by 40% in the past 13 years, surpassing inflation at 30%. The use of contract labor for maintenance work was another point of contention in the deal.
The BCMEA highlighted that the ratification of the agreement would bring “certainty and stability for the future of Canada’s West Coast ports.”
Paul Brashier, vice president of drayage at ITS Logistics, expressed concerns about the lasting damage to the reputation and reliability of Canadian ports as a result of the strike. Brashier mentioned that cargo owners and shippers in their network had decided to permanently move imports back to U.S. ports of entry on the West Coast due to the lack of government intervention and direction.
During the 14-day strike, ocean carriers redirected Canadian ports to U.S. ports to maintain their schedules and unload cargo. Some U.S. shippers also changed the destination of their containers to U.S. ports. Eventually, some ocean carriers returned to the Canadian ports to unload both Canadian and U.S. freight.
Canadian Labor Minister Seamus O’Regan acknowledged the supply chain damage caused by the strikes and called on federal officials to review the situation to prevent similar disruptions in the future.
Supply Chain Delays Expected to Last Months
The strike by dock workers resulted in a considerable backlog of containers, and it will take at least two months for railroads to clear out this pileup. At the peak of the strike, around $12 billion worth of freight was stranded on the water. Some of this trade was diverted to U.S. West Coast ports.
The Railway Association of Canada initially estimated that it would take three to five days for networks and supply chains to recover for every day the strike lasted. After the first strike ended on its 13th day, delays for rail containers were estimated to be between 39 and 66 days. With an additional day of work stoppage, the congestion increased to a range of 42 to 70 days.
According to a spokesperson from the Railway Association of Canada, delays are trending towards the upper end of that range. Changes in vessel routes have impacted the profitability of Canadian Pacific Kansas City and Canadian National Railway, as fewer containers can be unloaded at U.S. ports. This decrease in containers also affects trucking companies. On the other hand, U.S. trucking companies and railroads such as BNSF (a subsidiary of Berkshire Hathaway) and Union Pacific will benefit from the additional containers arriving at U.S. ports. If Canadian trade is rerouted to the East Coast due to West Coast labor issues, Norfolk Southern and CSX will also benefit.
During the first two weeks of the strike, railroad trade from Canada to the U.S. was reduced by 82%. Although train trade has started to recover, there is still a 6.2% decrease in the week ending July 29.
The supply chain issues have already impacted the revenue of railroad companies. Canadian Pacific Kansas City railroad’s chief marketing officer, John Brooks, stated that the labor unrest will negatively affect the company’s revenue by $80 million. The company aims to recover these losses in the third and fourth quarters. Canadian National Railway has announced additional trains to expedite the clearing of container congestion.
The timing of the strike coincided with the peak shipping season, when retailers receive back-to-school and holiday items.
