- Freight rail cargo entering the U.S. takes a hit due to Canadian West Coast port strike.
- Key sectors affected include forest products, oil and petroleum, non-metallic minerals, and chemicals.
- Daily container trade from Canada to the U.S. reaches $572 million, risking disruptions in supply chains.
The latest data on rail trade from the Association of American Railroads has unveiled the devastating consequences of the ongoing strike at Canadian West Coast ports on freight rail cargo entering the United States. Last week, year-over-year intermodal Canadian rail witnessed a significant decline of 46.2% as a direct result of the strike.
Industries hit hardest by this disruption include forest products like lumber and wood, oil and petroleum products, non-metallic minerals such as crushed stone, sand, stone, clay, and glass products, as well as chemicals.
In an official statement, the AAR acknowledged that while the decline in trade may have been influenced by the July 4 holiday, it is undeniably a tangible indicator of the strike's impact on rail customers and the broader North American economy. As time goes on, the repercussions on the North American supply chain will only intensify.
According to the U.S. Census data, approximately $572 million worth of container trade arrives in the U.S. from Canada on a daily basis. From January 2022 to May 2023, the monthly imports of U.S. goods from Canada fluctuated between $31 billion and nearly $41 billion. Notable imports in May encompassed mineral fuels, vehicles, and computer-related machinery.
On July 1, the International Longshoremen and Warehouse Union of Canada initiated the strike. Negotiations between the ILWU Canada and the British Columbia Maritime Employers Association have been tense, leading both parties to seek assistance from federal mediators in order to reach a resolution.
The United States and Canada share a long-standing robust trade relationship, with each country serving as the other's primary trading partner. Around 20% of U.S. trade relies on the Canadian ports of Vancouver and Prince Rupert, which erupted in strikes after the union and industry representatives failed to strike a deal within the allotted cooling-off period. The Canadian Chamber of Commerce approximates that $605 million worth of trade passes through either of these two ports every day.
Experts predict that it could take three to five days for networks and supply chains to recover for each day the strike persists. Consequently, if the strike were to conclude on its twelfth day, rail containers would experience delays ranging from 36 to 60 days. These estimations exclude the additional delays for vessels awaiting processing, which would further compound the disruptions. Paul Brashier, the Vice President of Drayage and Intermodal at ITS Logistics, notes that vessel diversions and the reassignment of containers on other vessels for U.S. cargo will increase the volume within the U.S. rail system. This surge in volume will also lead to additional time and charges, including extra rail fees, customs fees, and port handling fees.
The decline in trade reflects the redirection of cargo from Vancouver and Prince Rupert to U.S. destinations. This interruption in trade has sparked concerns regarding supply chain stability in the United States. ITS has designated both the U.S. West Coast and East Coast rail ramps as red in its freight index, signaling an impending congestion resulting from the strike.
Eric Byer, the CEO of the National Association of Chemical Distributors, highlights the impact on products used in paints, coatings, and acids from Asia. Members of the association are already experiencing delays of three to four weeks due to the strike. While Byer acknowledges the presence of excess capacity in the market, he stresses that the current situation, although not yet at a crisis level, could worsen if the strike continues for weeks.
WOM Money Picks
Be a part of the winning team | 81% Success Rate.