Rail/Intermodal
The port labor drama came back to the forefront this week after the International Longshore and Warehouse Union Canada issued a 72-hour strike notice on June 28. If it comes to fruition, a strike would halt container movements through the ports of Vancouver and Prince Rupert, British Columbia. A shutdown could occur as early as July 1 if no deal is reached between the two sides before then.
The strike notice comes less than two weeks after the ILWU locals representing U.S. dockworkers reached a six-year agreement that should keep volumes flowing through the U.S. west coast ports. Any disruption will flow through to Canadian National and Canadian Pacific’s intermodal volumes fairly quickly and directly. Any work stoppage would be yet another hiccup for carriers and shippers that have spent the last year or more navigating around disruptions in their supply chains.
Surface Transportation Board Order
In other news, the Surface Transportation Board ordered BNSF to move 4.2mn short tons of PRB coal from the Navajo Transitional Energy Company mine in Montana to export terminals in Canada. An additional 1mn short ton would be added as the carrier adds resources and gets its network back to a level that it can support additional shipments.
The order came after the coal producer filed at the board in late April that poor service from BNSF was hurting its ability to be a reliable supplier in export markets and that BNSF’s performance was not adequate to support that level of traffic. The ruling follows an emergency STB service order last year in the Foster Farms case against Union Pacific, which ordered the other large western carrier to prioritize animal feed to Fosters’ sites in California.
The latest ruling also shows that the board does not believe carriers’ service problems of the last few years are fully resolved and that the board is still open to shippers who come to it with evidence that rail service is hurting their ability to compete.
Carload Volumes
Overall carload volumes were down sequentially in the latest week ended June 24 moved down sequentially on weakness in the coal and grain sectors. Coal has been holding up well in the first half of the year, but the latest week’s results cast some doubt on how long that will last in the second half. Low natural gas should restrain coal demand.
Grain volumes have been on a downward trajectory since the beginning of the year and that is also pressuring overall volume levels for carload traffic. Economically sensitive freight shows a little brighter story with volumes seasonally higher in the latest week. Economically sensitive freight continues to run ahead of the overall carload result.
