Partial strike at Montreal port disrupting supply chain, piling on extra costs, shippers and manufacturers warn

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Logistics firms and manufacturers are warning that a partial strike at the Port of Montreal will disrupt supply chains and potentially force factories to rack up extra costs.

On Tuesday, longshoremen began refusing to work overtime and weekends, restricting the amount of cargo that can be processed by the port. The work slowdown is part of an ongoing labour dispute dating back to a strike last August that forced at least 21 ships to divert to other ports.

A.P. Moller — Maersk, one of the world’s largest shipping lines, told clients it will accelerate its contingency measures since the Montreal port will not be operational on weekends, until further notice. “We encourage our customers to utilize the alternate gateways we are able to offer,” Maersk told clients in an advisory.

The shipping company said extra fees will be implemented for Toronto/Montreal cargo to Atlantic gateway ports in Halifax and Saint John.

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“It’s important to understand that every port must compete for business and cargo volumes are not guaranteed,” Omar Shamsie, managing director of Maersk Canada, told the Financial Post in an emailed statement. “Customers have a choice in ports and their business will always find the most efficient way to flow. The Port of Montreal’s labour negotiations have lasted 30 months and this uncertainty has influenced the confidence of local supply chains and pushes cargo to alternative ports.”

Maersk said its railway partners Canadian National Railway Ltd. and Canadian Pacific Railway Ltd. were also adjusting the receiving windows to avoid weekend departures. Both railways did not respond to a request for comment by the time Financial Post went to press.

The striking longeshoremen, who are represented by the Canadian Union of Public Employees, are asking for better work-life balance. They voted to start the partial strike after the port told them Friday that it would exercise its lockout rights, although when it will do so is unclear. CUPE did not respond to several requests for comment.

Martin Imbleau, CEO of Montreal Port Authority said the strike is “seriously impacting” activities at the port.

“And the potential for escalation will only further curtail it. After an 11 per cent decline in volumes in March, the Port now has to deal with decisions that will drop its port capacity by close to 30 per cent. For once in its history, the Port of Montreal is posting results that pale in comparison to its competitors on the U.S. East Coast, who are enjoying significant growth.”

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Manufacturing groups have stepped up their calls for Ottawa to intervene in the labour dispute.

“This isn’t just a Quebec issue, it’s a Canadian issue,” Dennis Darby, CEO of the Canadian Manufacturers and Exporters association, told the Financial Post in an interview. “It’s important that we say to the federal government, ‘You need to find a way to get the parties, if not talking, then at least to find a process that doesn’t result in a slowdown.’”

Because just-in-time supply chains remain the dominant paradigm in manufacturing, the partial strike could force manufacturers to slow down or halt some of their production lines almost immediately, said Darby, even if some factories might be holding slightly more inventory than usual because of concerns around COVID-19.

This isn’t just a Quebec issue, it’s a Canadian issue

Dennis Darby, CEO, Canadian Manufacturers and Exporters

“It won’t be a matter of months,” he said. “It will be a matter of days or weeks before we see an impact.”

The slowdown will impact manufacturers’ access to materials and components, as well as restrict their ability to export finished goods, he said. More than 35 million tonnes of cargo passed through the port last year, according to data from Statistics Canada.

Brian Kingston, CEO of the Canadian Vehicle Manufacturer’s Association, said while the port is less crucial for auto exports as most cars are shipped to the U.S. via train or truck, the disruption to supply chains will severely increase costs for automakers.

“The strike at the port isn’t necessarily going to shut down (auto) production, it’s just going to make the supply chain even more inefficient and increase costs,” he said. “Canada, as a manufacturing jurisdiction, we have to constantly compete with the United States and Mexico. And a critical component of being a competitive manufacturing jurisdiction is having a reliable trade infrastructure.”

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Kingston said manufacturers have known a strike could be brewing in Montreal for some time, so many had begun reorganizing their supply chains, such as by redirecting ships to ports in Saint John, Halifax and the northeastern U.S.

But that solution comes with increased costs and complexity, including additional rail travel and the bureaucracy-intensive process of moving goods over the U.S.-Canada border.

“It would be damaging enough in a situation where we were looking at a normal economic growth path,” Kingston said. “But we’re now coming out of the biggest downturn since the Great Depression… And so this is the definition of an own goal.”

Lane Ferguson, a spokesperson for the Port of Halifax, said space is already at a premium, thanks to a surge in shipping activity that began in the second half of 2020 as the economy began to recover.

He said the limited space means shipping companies probably will not divert many of their vessels to Halifax. Port Saint John spokesperson Paula Copeland said her employer still has capacity for more ships.

Darby said intervention from the federal government is needed to protect the manufacturing industry and broader economy.

“We’re hoping that the federal government can weigh in and use whatever powers it has,” he said. “Historically, it could be anything from binding arbitration to temporary back-to-work legislation.”

Financial Post