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Weekly Market Update: December 1, 2021

Latest News

CN calls a halt to reopening in BC. Flooding in southern B.C. continues to present logistical challenges for exporters as Canadian National Railway Co. shut its
service along the key freight corridor because of heavy precipitation and traffic is moving slowly through the Port of Vancouver. “The recovery of the
manufacturing sector in general has slowed down and the crisis in B.C. is just going to make it worse,” said Dennis Darby, the president of Canadian Manufacturers
& Exporters. He said trains were running at very low rates even before the Montreal-based railway pulled the plug on its reopening efforts. “We hope … that this
gets back to normal as soon as possible, but it’s going to take weeks at least, months probably.” CN said it moved seven trains during the weekend but decided to
“proactively close its network” because rain was causing increased debris, washout, and landslide activity. “Our crews are working to find safe and effective ways of
managing the waterflow, stabilizing the infrastructure and monitoring the overall state of the network,” railway spokesman Mathieu Gaudreault wrote in an email.

Diversion to Prince Rupert: CN has been able to divert some rail traffic to the Port of Prince Rupert, which remains fully operational and is not impacted by the
severe weather. But CN said northbound and eastbound traffic to and from Vancouver are still affected by this situation. Canadian Pacific Railway Ltd. cars loaded
with Prairie grain and fuel entered Vancouver last Wednesday for the first time in days after its rail corridor sustained heavy damage in some 30 locations between
Vancouver and Kamloops, B.C.

CP needs CN track: However, the Calgary railway says it needs access to CN tracks on its busiest corridor where they share rail infrastructure in order to maximize
capacity. “As CP resumes operations and moves from restoration to recovery, CP will closely co-ordinate with customers and terminals to clear the backlogs as
safely and efficiently as possible,” spokeswoman Salem Woodrow wrote in an email. “As a railway, we recognize how the service we provide impacts people’s lives
and businesses, moving fuels we depend on, the food we eat, the vehicles we drive and the clothing we wear.”

Vancouver clogged: At the country’s busiest port, a high number of cargo ships are anchored and hampered from unloading their loads while empty ship
containers are rushed back to Asia empty. The number of empty containers through October was up 72 percent from a year ago while exports were down 11
percent, says GCT Global Container Terminals Inc. Port of Vancouver president Robin Silvester says insufficient land for container storage and transloading is
accentuating the problem with shipping carriers unwilling to wait for containers to be filled in Canada.

Air Freight

Ground congestion muted air cargo growth in November. Despite strong demand, volumes fell by 1.2% versus October – reversing the trend traditionally seen
in the peak build-up to Christmas – according to CLIVE Data Services. Congestion “on the ground” muted air cargo’s growth in November, with volumes falling by
1.2% versus October – reversing the trend traditionally seen in the peak build-up to Christmas – according to the latest global air cargo market intelligence from
industry analysts CLIVE Data Services. CLIVE’s analyses of the air cargo market for the full four weeks of November 2021 measures the industry’s performance to
the pre-covid 2019 level, as well as providing 2020 year-over-year comparisons, to produce a meaningful assessment of the current operating performance. Last
month’s fall in volumes compared to October 2021 came despite a 0.5% rise in capacity, while overall air cargo rates climbed +8% in November month-on-month.

Compared to November 2019, last month recorded a 3% decline in demand, but overall air cargo rates remained buoyant at 159%. Capacity versus two years ago
was -12%, lifting CLIVE’s ‘dynamic load factor’ – based on both the volume and weight perspectives of cargo flown and capacity available to produce a true
indicator of airline performance – up 2% pts to 66%.Europe to North America market data for the last week of October versus the third week of November, prior to
the Thanksgiving holiday in the US, showed capacity down 7.3% and load factor up 4% pts to 86%. Air freight rates for this market consequently saw a 10%
increase. Any hope that the opening up of transatlantic services would offer some relief to the cargo market was quickly eradicated by increased volumes of
passenger baggage.

Sea Freight

Ocean freight capacity restoration ‘is key to crisis recovery’. Growth this year in the transport of international goods has bypassed traditional scheduled
containerised ocean freight services, as shippers found alternative means of getting their goods to market, new report highlights. Much of the growth this year in
the transport of international goods has bypassed traditional scheduled containerized ocean freight services and been moved by other means, according to the
findings of the latest Container Shipping Market Quarterly Review, published by the Global Shippers Forum (GSF) and MDS Transmodal. The report indicates that
the global trade in goods has continued to grow this year, including in the third quarter (Q3) of 2021, but with deployed container shipping capacity fully utilised,
that additional growth is being moved by a mix of air freight, rail services between China and Europe, and own-charter vessels or services provided by non-liner
carriers. Commenting on the findings of the latest Quarterly Review, GSF director James Hookham said: “The Container Shipping Market Review shows the extent
to which shippers sought out alternatives, as shipping lines priced themselves out of reach and narrowed the cost difference with offerings from other modes. A
measurable share is also accounted for by vessels chartered by shippers for their own goods, or by other non-liner shipping carriers.”

Port of Vancouver congestion worsens. More than 50 ships were waiting on Monday to unload at the beleaguered Port of Vancouver, still dealing with the
impacts of a major storm two weeks ago and ongoing rain that continues to set back reconstruction efforts in the province of British Columbia. A provincial state of
emergency has now been extended to December 14. Rail and road links from the port to the rest of the country remain an issue, meaning that containers are
backing up at the port’s terminals. To help tackle that challenge, the federal government is providing more than C$4m to prepare an undeveloped 40-acre
industrial site to temporarily store empty containers. The federal and provincial governments have established a joint supply chain recovery working group to help
prioritize efforts to support supply chain operations, and launched a survey to gather stakeholder input to that process. The governments have asked shippers to
exercise restraint in seeking to send non-essential goods into or through B.C.’s Lower Mainland. Canadian National Railway, one of Canada’s two major rail lines,
shut down its service in the region on Monday. “After moving seven trains during the weekend, CN took the decision to proactively close its network as the large
amounts of precipitation into British Columbia were causing increased debris, washout and landslide activity,” the company said. The Port of Vancouver noted in an
update that “a timeline for restored rail operations through the site is currently unavailable.” In the meantime, CN is sharing the Vancouver-Kamloops line of its
competitor, Canadian Pacific Railway. CN has diverted some rail traffic to the Port of Prince Rupert, further to the north along the Pacific coast. Prince Rupert has
not been affected by the recent weather events.

Trucking

Two B.C. container fleets face strike action by Dec. 3. Truck drivers with two fleets that serve the Port of Vancouver could go on strike as soon as Dec. 3, adding
to supply chain disruptions linked to B.C. floods. Unifor has issued 72 hours’ notice of the strike, following a vote by container truck drivers at Aheer and Prudential
Transportation. They’re looking for the fleets to adopt a pattern collective agreement reached in August with Harbour Link Transportation. That deal includes
health, dental and insurance benefits for all drivers as well as higher payments for waiting time. The two fleets represent 170 trucks, or about 10% of the container
trucks serving the Port of Vancouver. “For the sake of stability at Metro Vancouver’s busy ports, I hope that the owners of Aheer and Prudential come to their senses,” said Gavin McGarrigle, Unifor Western Regional Director. “Fairness across the sector is not too much to ask.” Unifor has made a point of highlighting labor
relations at Aheer Transportation, which in 2017 and 2018 was fined by the Trucking Commissioner and has lost labor board and arbitration rulings.

Market Sources

https://www.insidelogistics.ca/disruption/cn-calls-a-halt-to-reopening-in-bc178378/

https://www.lloydsloadinglist.com/freight-directory/news/Ground-congestion-muted-air-cargo-growth-in-November/80436.htm#.Yaej1MfMKUk
https://www.lloydsloadinglist.com/freight-directory/news/Ocean-freight-capacity-restoration-%E2%80%98is-key-to-crisisrecovery%E2%80%99/80429.htm#.YaekWMfMKUk
https://splash247.com/port-of-vancouver-congestion-worsens/
https://www.trucknews.com/transportation/two-b-c-container-fleets-threaten-strike-action-by-dec-3/1003155506/

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