Executive summary
- The COVID-19 pandemic has abruptly upended supply chains, placing global and national transportation systems under unprecedented stress in a highly volatile economic environment. Within this broader context, the prolonged uncertainty on the labour situation at the Port of Montréal have been exerting additional pressure on the strained transportation system, causing significant economic damage to Canadian businesses, which is worsening every day.
- Two weeks of partial strike (alternating between full stoppage on the weekends and partial stoppage during the weekdays) has sent repeated shocks and disruptions, impairing the basic functioning of the port, already operating at 30% reduced capacity (loss of cargo worth $90 million/week).
- Longshoremen have declared a full unlimited strike at the Port on April 26th. The system has entered into this full work stoppage crippled and backed up due to irregular services experienced over the past two weeks. This has created backlogs at the Port, vessel diversions and had a far reaching impact beyond Montréal.
- With the back-to-work legislation making its way through the Parliament, the Port of Montréal and the railways are planning the reopening of the Port. In this context, all scheduled vessels are making their way to the Port. No additional ships are expected to be rerouted
- As of April 29th, there continue to be 15 critical containers on ground at the Port. These containers have been sitting at the Port since the beginning of the full strike. In addition, 121 critical containers are on 8 ships heading toward the Port.
- In order to efficiently restart operation and clear the on-dock backlog, the Port will require a constant flow of empty rail cars.
- The Port is actively contacting clients (notably in the US) to inform them about the Legislation and the resumption of activities.
- The spread of the cascading effects are significant and the impact of a full strike is impeding the flow of $270 million worth of goods/week transiting through the Port. The initial direct impact on transportation services at the Port (around $40 million/week) will quickly spread out to other industries and regions of the country and could reach $100 million/week.
- Current disruptions are creating challenges for Canadians to access key commodities including, fresh produce, fertilizers, drugs, construction materials, important chemicals, and various consumer goods.
[ATIP redacted]
Economic and Stakeholder Impacts
Since August 2020, the increasing pessimism among shippers regarding the reliability of the Port has resulted in traffic diversions and volume declines with cascading effects throughout the Canadian freight and logistics system.
- The Port of Montréal is a key international and domestic gateway of critical importance to the Canadian economy. It is the 2nd largest container port in Canada and the 12th largest in North America. The Port handles $275 million worth of cargo daily, supports more than 19,000 direct and indirect jobs.
- Containerized products handled at the port represent 40% of the total tonnage. The top containerized cargo (inbound and outbound) are food products (21% of containerized cargo), forest products (13%), grain/cereals (12%), miscellaneous metallurgical products (8%), steel (6%) and construction material (4%).
- The strike of August 2020 was very disruptive to the transportation sector and businesses with over 21 ships diverted. Alternative ports, such as Halifax and Saint John, were unable to manage the surge in traffic, as companies attempted to reroute orders away from Montréal. Rail lines from these ports were at full capacity, and trucking companies could not keep up with demand. Backlog of traffic took months to resolve.
- Given the major commercial risks associated with another labour disruption, companies have already shifted traffic away from the Port of Montréal. The Port has recorded a sharp decline in container traffic in March (-1o% in container volumes relative to the previous March), despite strong North American demand.
- A number of high-volume domestic (e.g. [ATIP redacted]) and international shippers (e.g. [ATIP redacted]) are using alternative ports (e.g. through US East Coast ports and the Port of Halifax), despite higher cost and longer transit times.
The system entered into a full shutdown at the Port after two weeks of partial strike that has created additional disruption to a system that is already strained with much higher costs for the Canadian economy and negative impacts for the delivery of key essential and time-sensitive products.
- The two weeks partial strike which meant no overtime work, no weekend work, or no training, has reduced the Port’s capacity resulting in a cumulative loss of about [ATIP redacted]. Based on TC’s calculations, this represents a reduction of throughput cargo valued at $90 million/week.
- The Port has entered into a full strike amid existing delays and congestion that have built up over the past couple of weeks.
- As of April 26, the Port had around [ATIP redacted] TEUs of cargo on ground, representing [ATIP redacted] days of backlog. Two container ships had been diverted to Saint John and Halifax (i.e. MSC Véronique, Maerks Penang), and one bulk vessel (i.e. Blair Mckeil) transporting [ATIP redacted] to Hamilton. One bulk ship transporting [ATIP redacted] was also diverted to Hamilton and a bulk ship [ATIP redacted] is currently at berth waiting for the strike to end. With the back-to-work legislation making its way through the Parliament, the Port of Montréal and the railways are planning the reopening of the Port. In this context, all scheduled vessels are making their way to the Port. No additional ships are expected to be rerouted
- As of April 29th, there are 15 critical cargo on the ground, 5 are high priority COVID-related equipment and the rest is pharmaceutical products and medical equipment. 67 critical cargo are on the four ships waiting at anchor.
- As of April 29, no critical containers were being moved. There were 15 critical containers on the dock, and 121 critical containers on ships destined for the Port of Montreal, for a total of 136 critical containers impacted by the strike. In addition (as of April 26th), 480 temperature-controlled TEUs of perishable import and export were on the ground.
- Cargo to Montréal is still under embargo by the railways.
- As the congestion continue to ramp up in the system, some shippers have started to feel the direct impact of this disruption, notably in sectors which are directly affecting the quality of life for Canadians. Small and medium enterprises as they do not have the same power and flexibility to make cost-effective alternate transportation arrangements. The Canadian Federation of Independent Business estimates that 40% of Quebec SMEs were impacted by the 2020 strike.
- Transport Canada has reached out to shippers in various key industry, with some having been affected negative (see the case studies in Annex A)
The full shutdown of the port will have significant permanent impacts on the Canadian economy
- The full shutdown of the port prevents the movement of $270 million of cargo per day. It is important to recognize that this is the value of goods being delayed and does not translate into direct permanent loss. While most of the merchandise transiting through the port will eventually reach markets, keeping their full value (transitory losses), highly time-sensitive perishable goods (e.g. meat, fruits and vegetables), losses in sales opportunities and associated reduced demand for transportation services (e.g. trucking), will translate into permanent losses for the Canadian economy.
- The full net economic costs to the Canadian economy of a complete shutdown of the Port are estimated to reach between $40 million and $100 million per week of strike. These will be permanent losses.
The most concerning problem is reputational damage that the strike has on Canada’s image as a reliable trading partner
- After more than two years of labour uncertainty with little progress in negotiations, the Port’s reputation as a reliable and competitive partner has been negatively impacted. Trade diversions to the U.S. could be permanent, which would damage the integrated transportation system around the Port of Montréal, notably creating financial losses to small trucking companies and owner-operators.
- The resulting deterioration of Canada’s reputation is especially severe in the context of COVID-19. While the government has signaled its intent to encourage the domestic production of critical goods (e.g. PPE, vaccines), if major Canadian ports are not viewed as reliable, it will become more difficult to attract private investment integral to this production capacity.
Annex A: Impact on shippers, case studies
Detailed Case Studies: Examples of Impacts on Specific Canadian Businesses
Food products:
[ATIP redacted]
Medical and pharmaceutical products
[ATIP redacted]
Automotive and Manufacturing
[ATIP redacted]
Retailers
[ATIP redacted]
Transportation-Logistics
[ATIP redacted]
Construction and technology
[ATIP redacted]
Chemical
[ATIP redacted]
Forestry Sector
- The Forest Products Association of Canada estimates that a shutdown of the port would cost the forest products industry close to [ATIP redacted] in additional transportation costs, and estimate that the industry already suffered [ATIP redacted] in additional costs over the 11-day strike in August 2020. [ATIP redacted]
Mining
- According to the Mining Association of Canada, mining is a leading customer at the Port of Montreal, moving large volumes of iron ore, nickel, gypsum and recycled metal to smelters and refineries in the region. On the backdrop of massive supply chain disruption, and unprecedented reputational damage to Canada as a reliable international trading partner, this strike and the lack of effective action to resolve it demonstrates an incomprehensible inability to prioritize Canada's economic recovery in one of our country's greatest times of need.