The following is an archived collection of our weekly insights through the month of February. Those who had signed up to our Interlog Insights newsletter received each week’s update to their inbox on the original release date. If you like what you see below, please feel free to sign up yourself to get these updates right as they come!
This month's insights
- U.S.-Asia Trade Agreement
- Canal Updates
- Labor Uncertainty
Week 3 - Originally released Feb. 16
Insight: Potential Strikes Cast Labor Shadow over the Port of Montreal
Labor uncertainty, a defining theme of Canada’s transportation tribulations in 2023, remains a fixture for the country in early 2024. While ports along Western Canada’s coast were in the spotlight last summer, attention has since shifted to other side of the country.
The Port of Montreal is now the epicenter as potential strike actions loom over Canada’s second-busiest port. Some 1,300 unionized dockworkers at the trade hub have been without a new labor contract since the previous one expired Dec. 31. Despite several negotiation meetings, the representative union chapter, Local 375 of the Canadian Public Employees (CUPE), and the Maritime Employers Association (MEA), which represents port and maritime employers, have failed to reach an agreement.
Montreal’s unionized dockworkers are reportedly seeking a 20 percent boost in wages over four years as well as permanent job security after three years. However, CUPE leadership asserts that it will not publicly comment while negotiations remain active.
The lack of a deal has concerned Canadian Prime Minister Justin Trudeau, who has voiced concerns over the possible long-term consequences of a strike at the port. Mainly, the loss of customers, including U.S. shippers, and broader supply chain disruptions.
As negotiations stall, federal officials have been tapped to mediate the impasse and prevent what could be a third labor strike in four years at the Port of Montreal. Members of Canada’s Federal Mediation and Conciliation Service will be taking part in the labor discussions going forward, according to an email from an MEA spokesperson to the Montreal Gazette
Recent history suggests a strike could occur, just can’t happen yet
The Port of Montreal has had a testy record over the last few years regarding labor disputes.
During the snarls of the pandemic shipping crisis, there were two labor-related setbacks which crippled the port’s operations, beckoning significant supply chain disruptions across Canada. The first event occurred in the summer of 2020, while the second happened in spring of 2021.
The latter dispute prompted the federal government to enforce a back-to-work order on striking workers (legal under federal law if deemed necessary to prevent a public crisis). This measure was controversial and upset union ranks.
That said, the occurrence of another labor-related action remains uncomfortably possible. The main reason why no strike has happened yet largely falls on the Canada Industrial Board reviewing a recent application by the MEA to declare certain dockworker positions “essential services” under the country’s labor code. Both the MEA and CUPE continue to provide information to help the federal board rule on a decision. Until the review is complete, neither side can engage in pressure tactics, like a strike or lockout.
Behind only the Port of Vancouver in handling, the Port of Montreal is one of Canada’s premier trade hubs, serving nearly two-thirds of the country’s population.
Last summer’s dockworker strike at Vancouver lasted 13 days, severely disrupting freight rail networks and stalling billions of dollars’ worth of cargo.
A new bar has been set with union expectations
Across the U.S. and Canada, unions have achieved record wage increases and other labor advancements. Take for instance, dockworkers along the U.S. West Coast and “Big Three” autoworkers. The success of these unions during their respective contract cycles has clearly emboldened labor representatives of present or upcoming negotiations of their own.
The International Longshoremen’s Association (ILA), the union which represents dockworkers on the East Coast and Gulf, has already vowed to strike if a “landmark deal” isn’t reached prior to the existing contract expiring Sep. 30, 2024.
Any labor proposal going forward will likely have to be, at minimum, parallel to the historical terms agreed upon in previous, respective, contracts. In other words, a new bar on labor expectations has been set higher. The question is how much higher can ambitious unions raise it to?
Webinar: Canal updates, finding the right service!
Watch January’s webinar for the latest on the Panama and Suez canals. Our team of experts also review the changing market and the litany of service options available to choose from!
Insight: Some Carriers Resume Select Services Through the Panama Canal
For the last couple of weeks of Interlog Insights, the Panama Canal has been a continued subject of discussion. Staying on theme, we’ll continue that discussion into this week of insights.
Last week we talked about canal officials announcing their position to stay at 24 daily transits until, at least, April. This week, several carriers announced that they are resuming some services through the Panama Canal.
Ocean Network Express (ONE) says east and westbound sailings on its EC2 service transiting the Panama Canal would be completely restored from February 11 departing from Tayma Express in Norfolk, VA.
There’s around four other eastbound EC2 services that are expected to use the canal in February, according to the Journal of Commerce.
Additionally, in a customer advisory last week, ONE said it may resume other services through the Panama Canal if conditions continue to improve.
THE Alliance has increasingly shifted their EC6 service back to the canal instead of other options. Additionally, a spokesperson for Hapag-Lloyd – who is still a part of THE Alliance until January 2025 – told the Journal of Commerce that their “EC2 service is transiting through the Panama Canal again.”
Currently the Panama Canal is going through a “dry season” which typically lasts from January to April. The “rainy season” is expected to begin again around May.
Week 2 - Originally released Feb. 9
Insight: New Transpacific Trade Agreement Centered on Supply Chain Improvement
A trade agreement between the U.S. and several Asian and Pacific Rim countries will take effect Feb. 24. Titled the Indo-Pacific Economic Framework for Prosperity (IPEF), the agreement is centered on fostering more resilient supply chains among member nations, all of whom trade on transpacific lanes.
Courtesy of a U.S. Department of Commerce release, IPEF will challenge participating countries to improve data sharing, develop warehousing near ports, and collaborate among other members on relevant policymaking. The trade pact also calls for identifying and reducing supply chain disruptions and bottlenecks, particularly ones that haunted logistics operations during the pandemic-era shipping crisis.
The IPEF agreement includes 14 member countries: the United States; Australia; Brunei; Fiji; India; Indonesia; Japan; South Korea; Malaysia; New Zealand; the Philippines; Singapore; Thailand; and Vietnam. The countries signed the agreement in November.
Aside from the agreement’s regiment towards improving supply chain resiliency, the IPEF will institute three new cooperative bodies: the Supply Chain Council; Supply Chain Crisis Response Network; and Labor Rights Advisory Board.
With the IPEF scheduled live for Feb. 24, member countries will have several milestones to meet over the next several months, according to the commerce department’s release.
By March 25, each country will have had to identify their representatives to the three supply chain bodies established by the agreement. From there, by April 24, the chair for each of the bodies will have been chosen.
In late June, the three supply chain bodies will have adopted the terms of reference (each body’s purpose, scope, limitations, etc.,).
On August 22, the IPEF will have developed guidelines for a reporting mechanism on labor rights issues in supply chains.
Member countries are also required to submit a respective list of “critical sectors and key goods” for cooperation” under the agreement by no later than 120 days after the IPEF takes effect.
IPEF’s three supply chain bodies
The three supply chain bodies will be the main drivers of the IPEF. Each has certain, broad, mandates to oversee cooperation and information sharing among member countries within their own topic focuses.
The Supply Chain Council will be tasked with policy development surrounding trade across key sectors and commodities. The group will also facilitate collaborative efforts involving supply chain improvements (resiliency, sustainability, transparency, etc.,). The Supply Chain Council will be staffed by government officials from member countries.
Meanwhile, the Supply Chain Crisis Response Network will run point on emergency response amid supply chain disruptions. The group will also develop preparation practices, or stress tests, to better condition member countries for potential crises in the future.
Lastly, the Labor Rights Advisory Board is centered around labor rights in supply chains among member countries. The group will promote best practices through business advisories.
Insight: Panama Canal Staying at 24 Daily Transits Until April
Last year, significant drought caused the Panama Canal to reduce daily transits of vessels.
However, through November and December of last year, rainfall and lake levels were less detrimental than predicted and the canal implemented some positive water-saving measures. This allowed for the canal to raise daily transits in January to 24.
Now, that number is expected to stay – at least until April.
Panama Canal Deputy Administrator Ilya Espino told Reuters that they see no need for further vessel transit restrictions until at least April, at which point they will evaluate water levels when the dry season ends.
Dry season in Panama typically lasts from January to May. With a long rainy season from May to January.
In an ideal world, if expected rain in May does indeed happen, the Panama Canal plans to gradually increase daily slots, with hopes to get back to a normal routine of 36 vessel transits a day during the rainy season.
“If rainfall does not begin in May, we would evaluate again whether to cut transit by one or two vessels per day, or to reduce maximum vessel draft to 43 feet,” Espino said.
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Week 1 - Originally released Feb. 2
Insight: Red Sea Detour Has Not Caused Congestion at East Coast Ports
The routing diversion of container ships from the Red Sea to around Africa’s Cape of Good Hope has added 10 to 14 days in transit for services from Asia to the U.S. East Coast. Port officials have alerted shippers to account for this in their lead times.
In late December, when ocean carriers made the decision to indefinitely withdraw their fleets from conventional routings via the Suez Canal and opt for the longer (safer) voyages around Africa, stakeholders were rightfully anxious about how this adjustment would impact the market.
As suspected, certain concerns have materialized. Ocean freight container rates have risen, including for Asia-U.S. West Coast trade (eastbound lanes which do not use the Suez Canal). Moreover, capacity has seen some tightening. After all, the longer transit requires more vessels in carrier rotations as they continue to maintain weekly service commitments.
However, other initial concerns have yet to manifest. The main being ship congestion at U.S. destination ports. Given the December shift’s abrupt change to scheduling, one could imagine there would be a growing queue outside American gateways. However, aside from occasional crowding, no U.S. ports are reporting outstanding backlogs.
New York port: no congestion, just vessel bunching
At the Port of New York and New Jersey’s ‘state of the port’ address, director Bethann Rooney assured stakeholders that the East Coast’s largest trade hub has not observed any major impact from the longer transits. The update comes as good news, especially when considering 45 percent of the Port of New York and New Jersey’s cargo volumes traditionally move through the Suez Canal.
However, Rooney went on to note that the port’s operations are not immune to the diversion and, in addition to the Panama Canal’s drought-related restrictions, are experiencing challenges.
The routing around Africa has led to mild cases of vessel bunching—when vessels arrive back-to-back or within a short time between each vessel. While not as severe as full-on congestion, vessel bunching is a frustrating side-effect of extra voyage time and supply chain disruptions. Rooney explained this has occurred because terminals are handling more ships than they would typically handle over periods of a couple of days.
Admittedly mild, these bunching episodes have not instigated any measurable slowdown at the East Coast port. On average, ships are only waiting around a day to berth, while dwell times on import containers remain unchanged, according to the port.
Red Sea crisis remains indefinite
The geopolitical situation which prompted carriers to withdraw their fleets from Suez transits is not showing any signs of improvement. The Yemen-based Houthis, a rebel militant group, remain indiscriminately attacking commercial ships in the Red Sea and Gulf of Aden. Supported by Iran, the group’s assaults represent a broader issue of instability in the Middle East and the ongoing Israel-Hamas war. As commercial interests flee, the potential of further military involvement from Western powers zeroes in.
The Red Sea is an indefinite “no go” for container shipping, as well as a growing number of other sectors. For the foreseeable future, port to port services from Asia to the East Coast will continue taking a longer detour around Africa’s cape.
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Insight: Does Mexico's Interoceanic Corridor Have Potential to Compete with the Panama Canal?
Operations have been ongoing for Mexico’s Interoceanic Corridor – a $2.8 billion project with a 188-mile route that connects Coatzacoalcos (on the Gulf of Mexico) with Salina Cruz (on the Pacific Coast). It has the potential to handle 1.4 million twenty-foot-equivalent units (TEUs) a year by 2033.
The corridor includes two seaports, railways, highways, three airports, a gas pipeline and a fiber optic network, the Mexico Daily Post reports.
Mexican authorities say the corridor has the potential to be an alternative as a cheaper and faster route than the Panama Canal, transforming the Isthmus of Tehuantepec to a center for global trade and boosting Mexico’s economy.
However, there are a couple of things to note. For one, this Interoceanic Corridor is only expected to move 1.4 million containers a year by 2033 – which is a significant amount lower the Panama Canal’s annual volume, which stands at an impressive 8 million TEUs.
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