This week:

• Canada’s rail shutdown strains nation’s trucking industry as the government intervenes
• India-US East Coast shippers drop plans for August GRI, rates good through the end of the month
• SoCal intermodal providers prepare for expected peak season bump
• Trans-Atlantic inventory restocking up amid potential ILA strike, front-loading continues
• Trans-Pac market and early peak season tested with spot  rate hikes

Canada’s Rail Shutdown Disrupts North American Supply Chain, Increases Demand on Trucking Industry

Once the Canadian rail shutdown got underway last week, the country’s trucking industry was asked to take up the slack. But with Canadian truck capacity hardly up to the task, the potential for catastrophe along the entire North American supply chain looms. Canada’s Labour Minister responded by ordering an end to the work stoppage and imposing final, binding arbitration between the disputing parties.

The shutdown was the result of a contract dispute between the Teamsters Canada Rail Conference (TCRC) and Canada’s two largest railroads, Canadian National (CN) and Canadian Pacific Kansas City (CPKC). The lockout started at 12:01 a.m. Eastern time last Thursday, August 22, following five months of failed negotiations.

Within hours, Labour Minister Steven MacKinnon ordered the Canada Industrial Relations Board (CIRB) to “assist the parties in settling the outstanding terms of their collective bargaining agreements, including by imposing final binding arbitration.” MacKinnon also instructed the board to extend the current collective bargaining agreements until a new deal is reached.

However, the TCRC vowed to challenge the government’s mandate. In a statement issued Friday night, the union said it would abide by the CIRB’s lawful decisions but is prepared to file challenges in federal court in opposition to being forced back to work.

According to industry observers, removing one Canadian trainload requires approximately 300 trucks to move an equivalent amount of products, and the nation’s trucking industry doesn’t have anywhere near that capacity. According to DAT Freight & Analytics data, the shutdown has raised spot truckload rates from Vancouver to Montreal, Toronto, and Windsor by double-digit percentages.

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India-US East Coast Shippers Drop Proposed August Rate Hikes

A general rate increase (GRI) previously proposed by the Mediterranean Shipping Co. for India-US East Coast bookings will not go into effect this month, the Journal of Commerce (JoC) reported this past week. According to an email from the Mediterranean Shipping Co. Agency (India) reviewed by the JoC, the planned August 15 GRI “will not be applicable.”

The JoC concluded that container lines on the India-US trade lanes “seem to have realized they have little room to push through” the rate hikes previously planned for this month, considering the market has started to settle.

Meanwhile, Mediterranean Shipping Co. also advised customers that current named-account contract (NAC) and freight-all-kinds (FAK) rates will be valid through the end of August.

Southern California Intermodal Providers Gear up for Peak Season Bump

Domestic intermodal providers in Southern California are preparing their containers and personnel before the expected peak season uptick. SoCal industry observers expect this year’s peak season bump to outpace last year’s, bringing volume near pre-pandemic levels.

The JoC reported that one intermodal provider, J.B. Hunt, recently hired 500 drivers and is currently flying more to West Coast stops to fill its trucks.

Since the end of the second quarter this year, “We saw demand trends normalizing, trends that we haven’t seen since 2019 and, based on conversations with our customers, those trends should continue this fall,” Spencer Frazier, executive vice president of sales and marketing for J.B. Hunt told the JoC last week.

Trans-Atlantic Inventory Restocking Up Amid Labor Concerns

With the rail shutdown in Canada and a dockworker strike at US East and Gulf Coast marine terminals looking increasingly likely, US importers of goods from Europe are continuing to front-load orders and perform early inventory restocking.

This year’s front-loading has added to port congestion around the globe. However, with labor contract talks between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) apparently stalled, US importers see few alternatives at this point.

Hapag-Lloyd CEO Rolf Habben Jansen attributed a 3% year-over-year rise in July Europe-to-US import volumes to the restocking trend and continued front-loading. “A lot of people are taking some measures to ensure they are not too vulnerable,” Habben Jansen told the JoC last week.

Container Lines Test the Strength of Trans-Pac Market and Early Peak Season With Rate Hikes

Asia-to-US East Coast spot rates remain strong, but container lines are testing the health of the early peak season with planned rate hikes. Industry analysts are watching with interest as it remains to be seen just how much container lines can increase spot rates since the rates have been down for five weeks straight.

Thanks to the ongoing front-loading and other global factors, spot rates for Asia-US shipments enjoyed healthy increases throughout the first half of 2024. However, they may have peaked in July, capping a rapid rise of almost 150% since April. However, with time running out before Asian exporters can get their goods through US East Coast ports before October 1, the rates have fallen every week since reaching their high points.