BC Port Strike Damaging Canada’s Trading Partner Reputation

By Eric Atkins, March 20, 2014, The Globe and Mail

The work stoppage that has choked the flow of goods and commodities at the Vancouver port is threatening key intermodal traffic for Canada’s two major railways and damaging Canada’s reputation as a reliable trading partner.

 

The three-week strike by about 1,800 truckers threatens to send ships to ports in the U.S. northwest that are not served by Canadian National Railway Co. or Canadian Pacific Railway Ltd., said Fadi Chamoun, an equity analyst with Bank of Montreal.

CN has stopped hauling pulp and paper from wood and pulp mills in Western Canada as ocean-going shipments have stalled and warehouses have filled up. The B.C. government said it plans to table back-to-work legislation this week, but it isn’t clear if that would return the port to normal operations.

 

“The significant reduction in export activity is expected to further pressure CN Rail’s forest products business, which was already grappling with sluggish demand from reduced construction activity levels as a result of harsh winter weather,” Mr. Chamioun said in a research note.

 

The truckers, unionized and non-unionized, are striking over unpaid wait times and other grievances. The port has said it will refuse to renew the licences for non-unionized strikers.

 

CN’s forest products business accounts for 9 per cent of its carloads and 14 per cent of its revenue, the most of any major railway in North America. Mr. Chamoun noted both railways’ intermodal container volumes will be hurt if vessels avoid the freight backlog by docking at Seattle, Portland or Tacoma, Wash., ports served by U.S. rivals.

 

CN spokesman Mark Hallman said any large shift of vessels to U.S. ports was a “concern” for the Montreal-based railway.

 

The railway has obtained an injunction preventing strikers from blocking the company’s domestic intermodal terminal traffic. But slowdowns persist at the terminal where bulk commodities – wheat, lumber and pulp – are containerized for outgoing ships.

 

Some shippers are trying to move their goods through these ports in the U.S. northwest. But the border snarls and longer distance can make that an expensive shift. And the Prince Rupert port up the B.C. coast is built for bulk commodities, not the containers by which manufactured goods and food travel.

 

For meat producers, the Vancouver port is the gateway to their biggest customers outside North America.

 

Ron Davidson, director of international trade for the Canadian Meat Council, said the work stoppage has halted weekly shipments of about 9,000 tonnes of beef, pork and veal worth $28-million destined for Japan, China and South Korea and other Asian markets.

 

“It really is having a major impact,” said Mr. Davidson, who represents Cargill and dozens of other meat processors across Canada. “We’re talking about food. And if our foreign customers aren’t getting their food, they’re going to go elsewhere.”

 

The port strike comes at the end of a tough winter for growers and shippers of grains. They have been unable to capitalize on strong prices and a record crop due to capacity shortages on the railways. The port strike is prolonging the frustration, and doing more damage to Canada’s reputation as a trading partner, industry groups say.

 

Gordon Bacon, chief executive officer of Pulse Canada, saw this damage firsthand on a recent trip to India, which is a major buyer of Canadian peas and lentils. Buyers there told him of long lead times to order from Canada, which adds to costs and uncertainty over prices and currency values. Where it once took six weeks to move a rail car of peas from a farmer’s field to a dock in India, it can now take as long as eight months, he said.

 

“We miss sales opportunities. We face … charges on cars that are waiting to be unloaded into containers and put onto ships. We miss the ability to meet new market demand and we undermine our reputation to be a reliable and consistent supplier,” Mr. Bacon said. “If you cannot be a reliable supplier in the food sector, I will look to other places or I will discount that origin that I can’t rely on because I’m going to have to carry inventory at my end. I’m going to have to have all of those costs because I just don’t know when it’s going to arrive.”

 

A problem for Canadian growers is international buyers can easily go elsewhere as other countries harvest their crops, and international demand for Canadian crops is seasonal. India, for example, harvests its own lentils twice a year.

 

Mr. Bacon likens the shipping stoppage to a gas station that regularly runs out of gas to sell.

 

“Would you drive up there not knowing if it’s going to be there? Or would you simply go somewhere else?”

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