This week:

  • By the middle of the year, longshore labor talks will simultaneously be playing out on the East, West, and Gulf Coasts 
  • The US chassis equipment shortages will be fixed by June 
  • New legislation is being drafted to update OSRA-22 
  • Canadian Pacific Railway acquires Kansas City Southern to make the first service spanning USA, Canada, and Mexico 
  • Full truckload and LTL PPIs show different pricing trends

Longshore Labor Talks will Span East, Gulf, and West Coasts by mid-2023

By the middle of the year, six port worker unions will simultaneously be in the process of labor negotiations with waterfront employers, spanning West, East, and Gulf Coasts. Even though the different talks are separate from one another and the timing is purely coincidental, the rare occurrence of simultaneous contract negotiations across all North American coasts can cause worry among shippers. 

The International Longshore and Warehouse Union (ILWU) contract talks with waterfront employers have been underway for over ten months, causing measurable import shifts away from the West Coast ports. The ILWU is also in the middle of other contract negotiations with clerical workers in Los Angeles and Long Beach to replace a six-year contract set to expire in June. 

On the East and Gulf Coasts, the International Longshoremen’s Association (ILA) is working through contract negotiations with employers to develop a six-year contract that will replace the current one ending in September next year. These talks, however, have paused in the meantime. 

ILWU Canada just started negotiations in the ports of Vancouver and Prince Rupert in British Columbia at the start of March, which could take up to 18 months based on previous track records. Meanwhile, the Canadian Union of Public Employees is set to begin negotiations in Montreal to replace the last short-term contract forced into place through arbitration by the government at the end of 2022. 

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The US Chassis Market will Soon Overcome its Equipment Shortages

Chassis equipment shortages that plagued the US market through and before 2022 should be overcome by June this year as new chassis equipment orders are fulfilled and while US import volumes drop. As the market approaches an equilibrium between demand and equipment, chassis providers should use the time to prepare for future surges in import volume. 

Truckers and BCOs are also acquiring their own chassis to improve performance as Union Pacific Railroad and the Federal Maritime Commission change their stance regarding the prohibition of using private chassis in merchant haulage agreements.

US Legislation Being Drafted Will Update OSRA-22 Less than a Year After Being Signed into Law 

A US congressman is drafting legislation currently referred to as the Ocean Shipping Reform Technical Act of 2023 that will update key aspects of the Ocean Shipping Reform Act 2022 (OSRA-22), which was signed into law in June last year. The updated legislation will aim to publicize marine terminal and ocean carrier penalties much more broadly to increase transparency while drawing a line regarding how China-based entities are involved in and influence US shipping. 

Under the current version of the draft, ties with China would be intensely scrutinized, and a ban would be placed to prevent US port authorities from using the Chinese National Transportation Logistics Public Information Platform (LOGINK). Ports caught using the platform would risk losing all federal funding. Ports will also need to add any ocean common carriers owned by the Chinese government to the FMC’s controlled carrier list out of fears that the Chinese government is conducting surveillance and spying programs on US supply chains. 

The CP-KCS Rail Merger will Create the First Rail Service Spanning USA, Canada, and Mexico

The Surface Transportation Board (STB) recently approved the acquisition of rail line Kansas City Southern (KCS) by Canadian Pacific (CP) Railway, with CP legally allowed to take control of KCS after April 14. 

Three FMC commissioners warned the STB that the acquisition would harm US ports and workers by diverting cargo away to Mexican and Canadian ports. The STB responded by stating that “[The merger] will benefit US shippers and receivers, given the availability of new single-line routes from the Port of Lázaro Cárdenas in Mexico to the interior of the United States, especially in times when western US ports are congested.” 

The STB will grant a seven-year overview period of the CPKC transaction where shippers and other railroads can report their concerns regarding how the merged railroad operates and its effects on US supply chains and economic activity. 

Truckload PPI Dropped in February, while LTL Pricing Shows a Different Pattern

The long-distance US truckload producer price index (PPI) dropped 9.7% in the first two months of 2023, indicating that shippers are getting rate recessions in their contracts with motor carriers after the last two years saw consistent price hikes. From December to January, the long-distance PPI dropped 8.6%, followed by a further 1.2% decrease from January to February and leaving it 12.8% lower year-over-year for February. 

While truckload pricing and the PPI fall, less-than-truckload (LTL) pricing is not following suit. The LTL PPI only fell 0.6% from January to February after rising 2.3% from December to January, with February 8.3% higher year-over-year.

The diversion of discretionary cargo away from the West Coast has led to many importers of Asian-made goods favoring ports in the Southeast, Savannah in particular. 2022’s Asia import volume only decreased by 0.3% after 2021’s 13.5% spike, however, the Southeast’s market share rose by 1.1% from 19.8% to 20.9% between these two years, a 5.2% volume increase, while the West Coast’s market share dropped from 59.9% to 56.4%.

Savannah led the Southeast ports with a market share increase of 0.7% to an 11.1% total, increasing the port’s import volume by 6.1%. Charleston followed suit with a market share increase of 0.5% to a market share of 3.8% after a 14.6% spike in shipment volume.

Although it remains to be seen whether the Southeast will maintain its market share after ILWU contract negotiations finish, the Southeast ports are a gateway to North and South Caroline, Georgia, Tennessee, and Florida. And as Southeastern ports get more upgrades and improved supply chain infrastructure investments, shippers may prefer to send imports from Asia directly to the Southeast ports rather than to the West Coast, where they must make the intermodal journey across the country.

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