On July 31, the U.S. Customs and Border Protection (CBP) published a general notice—later posted on…
Strike at CN as rail labour negotiations remain stalled in the US. About 750 signals and communications workers at Canadian National Rail (CN) went on strike on Saturday, after the International Brotherhood of Electrical Workers and CN management failed to reach agreement in contract negotiations. According to CN, the unresolved issues are primarily about wages and benefits. Management has implemented a contingency plan, saying this would allow it to operate at a level of safe operations across its network as long as required, but the union has challenged that view. The workers on strike maintain and repair trackside electrical and signaling equipment that regulates the movement and speed of trains, and the Canadian rail network has been under strain from heavy volumes of imports, particularly on the west coast. CN has offered to resolve the differences through binding arbitration. However, south of the Canada-US border, a contract dispute between rail carriers and about 115,000 unionized employees has moved beyond the possibility of binding arbitration. After more than two years of talks, the National Mediation Board, which stepped in earlier this year to facilitate a breakthrough, called a stalemate and offered binding arbitration, which was rejected by the Coordinated Bargaining Coalition, which represents ten rail labour unions. The labour representatives reasoned that this would not allow rank-and-file union members to vote on labour contracts. Talks over a new contract commenced in January 2020 but made no progress, according to the unions. With their contract frozen in 2019, workers have seen their purchasing power eroded by inflation. The National Carriers Conference Committee, which represents the Class I railways, offered advance payments of $600 a month on top of wages to union members, which would have been deducted from any retroactive lump sum or pay increase the two sides could agree upon. But the unions rejected this offer as “a bargaining ploy”. They argued that, while inflation was hurting their members’ financial situation, wages were not the only issue of contention. Benefits are another sticking point, with the union accusing employers of seeking to increase health expenses that would effectively negate wage increases. While the employers have indicated a willingness to negotiate the benefits aspect, they are opposed to union demands to include work rules in the discussion, arguing that these could be dealt with separately. The unions have been adamant in their opposition to plans to shift operations to one-person locomotive crews, which is favored by the Class I carriers.
CN maintains normal rail operations across Canada as IBEW strikes. MONTREAL, June 20, 2022 (GLOBE NEWSWIRE) — CN (TSX: CNR) (NYSE: CNI) announced today that normal rail operations continue safely as it has implemented its operational contingency plan. The plan allows the Company to maintain a normal level of safe rail operations across Canada and serve its customers for as long as required. Following the International Brotherhood of Electrical Workers’ (IBEW) rejection of CN’s latest offer, CN Executive Vice-President and Chief Operating Officer Rob Reilly sent a letter to all employees represented by the union to inform them of CN’s latest offer. The letter is available here. While the Company is disappointed with the current situation, CN remains committed to finding a resolution and it continues to encourage the IBEW to end its strike through an agreement or through binding arbitration.
Forwarders must prepare for airfreight volume crunch, says Airforwarders Association. Better communication is key to managing an oncoming air cargo capacity crunch in the US caused by worsening ocean freight capacity issues. The forecasted surge in demand for US air cargo capacity will be largely driven by a lack of sailings with ocean suppliers, but air cargo forwarders must “learn to be adaptable” in the current climate of already constrained airfreight capacity, said Brandon Fried, executive director, Airforwarders Association (AfA). Although global air cargo capacity is increasing, Fried, told members of the Los Angeles Air Cargo Association (LAACA) that the US capacity crunch will be driven by a perfect storm of cancelled China to US sailings, congestion at US airports, limited warehouse space, the labour shortage and rising inflation “The challenges for ocean carriers are well documented and we understand that they are looking after profit margins, but air capacity is already constrained by multiple factors,” said Fried. “Congestion at major airports is exacerbating the strain on supply chains across the US. “To rise to these challenges, the air forwarding community must better communicate with each other and learn to be adaptable.” AfA recently launched its Airport Congestion Committee (ACC). Set up to find realistic solutions to relieve airport congestion, the ACC will present findings to private, public, and government entities as workable policies for urgent new legislation.
Ground bottlenecks causing higher air cargo rates. High rates in the air cargo industry are caused by bottlenecks in ground handling capacity rather than aircraft capacity constraints. This is according to Niall van de Wouw, co-founder of CLIVE Data Services and now chief airfreight officer at Xeneta, who explained in a TIACA Economics4Cargo airfreight update on June 16 that these bottlenecks are caused by shortages of cargo handling staff and truck drivers. “As a result of that, it’s still quite difficult to get your goods from A to B by air.” Shortages, bottlenecks and uncertainty are keeping “rates at a high elevated level”, he said. He said Covid regulations could further impact on staffing shortages. “Therefore bottlenecks are being created in the supply chain and rates not declining as fast as one would expect purely based on the load itself.” Global economic uncertainty alongside low but rising interest rates and high inflation are “starting to bite air cargo volumes”. Comparing May to April, rates are starting to soften and volumes are slowing. Rates are still more than plus 130% on pre-Covid despite demand declines. However, the situation is easing: the rates in March were 20% higher than they were 2021 and now they are 16% higher, said van de Wouw. “We saw rates really jump from Europe to North America during the Covid period, with load factors up into the mid 80% but now they’ve gone much lower and therefore drastically changed dynamics of the market.” Now belly capacity has increased with the return of passenger flights there is 4% more capacity now on a global level than in 2021.
Port logjams and ocean delays push China-Europe rail cargo via Russia. Long sea freight delays have left shippers with “no other choice” they say, but to use Russia again for China-Europe rail freight. Like most European forwarders, Netherlands-based Rail Bridge Cargo initially suspended its service through Russia when the war in Ukraine began. However, MD Igor Tambaca said some customers had requested Russian freight options again. He told The Loadstar: “We could not look away from companies which have no issue with transit through Russia, given their supply chain challenges with sea freight. “Time-to-market for them is a big issue and some said they were dealing with sea freight reliability of around 30% and transit times of 60-65 days.” The port congestion in northern Europe has played a role too, Mr Tambaca added, especially at Hamburg and Rotterdam. For example, he said, one customer’s cargo should have arrived in Rotterdam, but was dropped off in Antwerp and waited seven weeks for an onward connection. He added: “By comparison, we can get containers from China to Duisburg in 16 days [via Russia]. That is a big difference for sometimes the same price as sea freight.” Nevertheless, Rail Bridge Cargo has also been active in launching four services along the middle and southern corridors from China to Europe, utilising intermodal routes through the Caspian Sea and the gateway ports of Istanbul, Varna and Constanta.
A potential economic recession and the supply chain bullwhip are colliding. Freight carriers across all modes should brace for weaker conditions in the coming months. Supply chains are experiencing a massive bullwhip from the COVID economy and have built up massive inventory levels. A slowdown in consumer spending caused by inflation and a potential recession will have a massive impact on freight demand and prolong an inventory drawdown. As we look at the pandemic through the rearview mirror, the economy is shifting to a new phase. While the United States is currently experiencing full employment, American consumers are incredibly stressed about the state of the economy and personal financial security. Inflation, crashing stock markets, higher interest rates, and economic uncertainty are sapping any confidence that full employment should offer. For supply chains, the consumer pullback couldn’t come at a worse time. The bullwhip effect has created a massive overstock of inventories and wreaked havoc on global supply chains as companies try to recover from the pandemic economy. The bullwhip effect- The ‘bullwhip effect’ is a term used in supply chain circles to describe a scenario in which temporary surges in retail demand are magnified and exaggerated by upstream manufacturers and suppliers, who rapidly increase production well beyond the level that can be supported by consumers. Eventually, retailers find themselves with more inventory than they can sell, and what started as a goods shortage ends up as a goods surplus. If there is a single chart that shows the supply chain bullwhip effect. Before COVID, the ratio of containers per shipment was fairly static and the two indices moved in tandem. Beginning in the summer of 2020, the container-to-shipment ratio exploded as Big Box retailers used their leverage to move more containers into their scheduled shipments. Smaller importers kept their container-to-shipment ratios more static, finding it harder to secure additional capacity on container vessels. This continued until the fourth quarter of 2021, when Big Box retailers reverted to previous ratios, likely believing they had ample inventory on hand to handle demand. At that point, had consumer demand levels remained stable, the bullwhip effect would have played itself out gradually, as retailers burned off higher levels of inventories over time. But on February 24, 2022, the world completely changed. Russia invaded Ukraine. Energy and food prices surged in response, setting off inflation rates that the Western world had not seen since the early 1980s. As inflation continued to accelerate into the spring, consumers pulled back spending on the very items they had previously consumed in excess. Retailers found themselves with even larger levels of inventories than previously forecasted and were forced to come clean in earnings reports and subsequent public announcements. After results from the first quarter of 2022 and the subsequent announcements of excess inventories and slowing consumer sentiment, the Big Box retailers pulled back on the quantity of containers per shipment. After all, why would you continue to order more if you had more than enough in stock?