MARKET BRIEF | September 2024
Impending ILA East & Gulf Coast Strikes
The upcoming September 30 expiration of the International Longshoremen’s Association (ILA) labor agreement with U.S. East and Gulf Coast port operators has sparked concerns of a potential strike that could paralyze ports that handle 43% of U.S. imports. Failed negotiations between the ILA and the United States Maritime Alliance (USMX) have led to a standoff, with union leaders accusing USMX of “corporate greed” and citing inflation’s impact on wages. In response, businesses are diverting shipments to West Coast ports, and expediting deliveries, though time for such measures is running out. Even if a last-minute agreement is reached, the ratification process could cause months of disruptions at ports across the U.S. The situation has already affected shipping rates, with Asia to East Coast rates dropping significantly. The Biden administration has pledged not to invoke the Taft-Hartley Act – an 80-day cooling-off period that would force workers back on the job while negotiations continue. So, with no government intervention, and as the deadline approaches, businesses are urged to develop contingency plans for possible disruptions.
Typhoon Bebinca Impacts Ports
Typhoon Bebinca, the strongest storm to hit Shanghai in 75 years, made landfall on China’s east coast early Monday, causing significant disruptions to shipping and daily life. The storm forced major ports, including Shanghai and Ningbo-Zhoushan, to drastically reduce operations, with container vessel port calls dropping by up to 95%. These ports, ranking among the world’s largest, are now facing heavily disrupted operations and increased congestion. The typhoon’s impact extends beyond maritime activities, affecting air and land transportation. All flights at Shanghai’s international airports were canceled, and railway operations were suspended. The storm has prompted large-scale evacuations, with over 400,000 people moved to safety in Shanghai alone. Bebinca caused extensive damage, knocking down thousands of trees and leaving 30,000 households without power. This weather event compounds existing supply chain challenges in Southeast Asia, following disruptions in the Red Sea throughout this year. The typhoon hit during China’s Mid-Autumn Festival holiday, potentially exacerbating its economic impact.
DSV Agrees to Acquire Schenker
Danish logistics giant DSV has agreed to acquire Schenker from Deutsche Bahn for EUR 14.3 billion, marking a significant consolidation in the global transport and logistics industry. The merger would spawn an organization with a projected annual revenue of EUR 39.3 billion and a workforce of 147,000 employees across more than 90 countries. Germany would become a key market for DSV, with plans to invest EUR 1 billion in the country over the next 3-5 years. While the deal has been signed, it still requires approval from Deutsche Bahn’s supervisory board. The acquisition comes after a competitive bidding process, with DSV reportedly emerging as the preferred bidder over private equity firm CVC Capital. CVC is still trying to sway Deutsche Bahn to reconsider the sale, indicating it would be prepared to discuss another increase in the equity value of its offer. Regardless, CVC believes their bid is “economically advantageous compared to the DSV offer.”
Canadian Rail Strike Aftermath
Canada’s major rail carriers, Canadian Pacific Kansas City (CPKC) and Canadian National (CN), have reported a return to normal operations following a brief work stoppage in late August. This disruption, which lasted less than a day, was quickly resolved through government intervention. The Canada Industrial Relations Board enforced a request from the Minister of Labour and Seniors for binding arbitration, ensuring railway workers returned to their posts by August 26. Both companies credit their swift recovery to prior planning and preparations, particularly those made for a potential strike in May. CPKC noted that while most operations have normalized, bulk freight, including coal, is still in the process of full recovery. The rail carriers had implemented freight embargoes to limit shipments when labor negotiations stalled, replacing agreements that expired in December 2023. Although trains are now running smoothly, CPKC acknowledged some financial losses due to shippers diverting freight to trucking carriers during the disruption. The Teamsters Canada Rail Conference, representing nearly 10,000 workers, has mounted a legal challenge to the binding arbitration order, though this does not override the government’s action. Industry experts note that North American rail operations have mostly stabilized following the resolution of the Canadian labor dispute.
