A container ship sits in Burrard Inlet in front off the coast of North Vancouver, July 11, 2023.

Don Mackinnon | AFP | Getty Images

The International Longshore and Warehouse Union of Canada (ILWU) and the British Columbia Maritime Employers Association (BCMEA) late Sunday announced a tentative labor agreement.

The two sides reached the deal with the assistance of the Canada Industrial Relations Board, according to a joint statement. “The parties are recommending ratification of the collective agreement to the union’s membership and member employers respectively.”

No specific details on the new deal were given.

“The critical issue is the practice of contracting out maintenance work that poses a significant threat to job security and the integrity of the LWU workforce,” Rob Ashton, president of ILWU Canada, said in a separate statement. “We are deeply concerned if left uncheck, this practice will lead to an eroision of our workforce and expertise, ultimately jeopardizing the stability and efficiency of Canada’s maritime industry.”

Ashton also said the union members view their work stoppages as a last resort.

Canadian Labor Minister Seamus O’Regan commented Monday morning on the announcement of another tentative deal.

This latest tentative deal does not mean the uncertainty is over. The first tentative labor deal was rejected by the union body in a two-day vote last week.

That deal, which was disclosed by the BCMEA, was a package that increased the compounded wage over four years by 19.2%. A signing bonus of $1.48 an hour per employee which tallied to approximately $3,000 per full-time worker was included. Also in the deal was an 18.5% increase in the retirement payout.

In a pushback against the union’s argument for having a salary sustainable against rising inflation, the BCMEA said, “Over the course of the past 13 years, longshore wages have risen by 40%, ahead of inflation at 30%.”

The labor strife has crippled the Canadian ports and inbound U.S. trade. A 14-day strike has led to more than 16 canceled sailings to the Canadian ports, according to maritime intelligence company, eeSea.

Changes to vessel routes impact the profitability of railroads Canadian Pacific Kansas City and Canadian National Railway, since fewer containers will now be unloaded at U.S. ports. This decrease in containers also impacts trucking companies. On the flip side, the extra containers coming into U.S. ports will add to the profitability of U.S. trucking companies and railroads BNSF, a subsidiary of Berkshire Hathaway, and Union Pacific. Over the long term, if Canadian trade is rerouted to the East Coast that would also benefit Norfolk Southern and CSX.

The strike has already hit the bottom lines of railroad companies. The labor unrest will negatively impact Canadian Pacific Kansas City railroad’s revenue by $80 million, Chief Marketing Officer John Brooks told analysts on a conference call Thursday. Brooks said the company is working to claw back those losses over the third and fourth quarters.

Canadian National Railway announced it was running additional trains to help expedite the clearing out of the container congestion.

Supply chain snags

The Railway Association of Canada originally estimated that it would take three to five days for every day the strike lasted for networks and supply chains to recover. When the first strike ended on its 13th day, delays for rail containers were estimated at 39 to 66 days. Adding another day with the on-again, off-again strike last week brought the congestion removal tally up to 42 to 70 days.

“Delays appear to be bearing out toward the mid-to-upper end of that range,” a Railway Association of Canada spokesperson wrote in an email to CNBC.

The timing of this strike adds unnecessary hurdles to peak season when holiday items are arriving for retailers. At the height of the strike, $12 billion in freight was stranded on the water. Some of that trade was diverted on vessels that called on ports on the U.S. West Coast.

“Our clients are facing about a two-month delay in the delivery of their product,” said Paul Brashier, vice president of drayage at ITS Logistics. “The vessel was delayed by several weeks and now the rail-bound containers sit at the Ports of Vancouver and Prince Rupert.”

Steve Lamar, CEO of the American Apparel and Footwear Association, said his group estimated that the first strike would cause an average of six to eight weeks of supply chain disruption before conditions return to normal. AAFA had called on the Canadian government to step in during the first strike.

For the third week in a row, rail traffic from Canada into the U.S. is down following the on-again, off-again western Canadian ports strike. The first two weeks of the labor strike prevented more than 80% of rail trade from entering the United States. The U.S. saw another 12% decrease in trade this week.

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