Market Matters Blog           06/27 14:31

   Is the Perfect Storm Brewing for Railroad and Port Logistic Failures?

   Rail and port workers are in the midst of contact negotiations, and failure 
to come to an agreement could be a disaster for West Coast ports and railroads.

Mary Kennedy
DTN Basis Analyst

   Rail and port workers in the U.S. and Canada are in the midst of contract 
negotiations, and a failure to come to an agreement could be a disaster for 
West Coast ports and railroads. Currently, there are three major 
transportation-related groups in contract talks with one already declaring a 
strike.

   On June 18, after rejecting the latest contract offer from Canadian National 
(CN), the International Brotherhood of Electrical Workers (IBEW) went on 
strike. The IBEW workers involved consist of approximately 750 signal and 
communication employees in Canada and walked off the job to fight for better 
wages and benefits.

   CN announced in a news release on June 20 that normal rail operations would 
continue safely, as it had implemented its operational contingency plan. The 
plan allows the company to maintain a normal level of safe rail operations 
across Canada and serve its customers for as long as required if the strike 
continues.

   CN Executive Vice President and Chief Operating Officer Rob Reilly sent a 
letter to all employees represented by the Union to inform them of CN's latest 
offer. "We have been in negotiations with the Union since October 2021," Reilly 
said. "CN has approached this round of bargaining with the objective of 
improving wages, benefits and work rules, and ensuring the safety of our 
employees. We have met or exceeded every one of the Union's demands in an 
effort to reach an agreement prior to the strike deadline. Unfortunately, we 
did not reach an agreement and the Union has exercised its legal right to 
strike." Here is a link to that letter: 
https://www.cn.ca/en/news/2022/06/cn-maintains-normal-rail-operations-across-can
ada-as-ibew-strike/.

   CN said that it is disappointed with the current situation but remains 
committed to finding a resolution, and it continues to encourage the IBEW to 
end its strike through an agreement or through binding arbitration.

   US RAILROAD WORKERS REJECT ARBITRATION AMID POOR RAIL SERVICE

   U.S. rail worker unions recently said "no" to railroad contract proposals 
after three weeks of mediation following more than two years of "fruitless 
negotiations" with Class 1 railroads. Enter the National Mediation Board (NMB), 
who put forth a proffer of arbitration to move the dispute to the final steps 
of the Railway Labor Act. 

   As of June 16, the first deadline passed for unions to accept the proffer, 
and then, on June 18, the parties entered into a 30-day "cooling off" period 
where the status quo is maintained. This is the first of three 30-day windows 
aimed at finding an agreement.

   At the end of that 90-day stretch, if no agreement is reached between the 
parties, congressional intervention could be all that prevents a national 
shutdown.

   On June 24, the Brotherhood of Locomotive Engineers and Trainmen (BLET) said 
it began mailing ballots to more than 23,000 members seeking authorization for 
the Union's leadership to call a strike should one become necessary to settle 
the current national contract dispute with the nation's largest rail carriers. 
This is a mandatory step required by the Brotherhood's internal law as the 
Union approaches the point where self-help becomes a legal option to both labor 
and management, noted BLET in a news release.

   "Let me emphasize that authorization does not mean a strike will occur, nor 
does it mean that all railroads may be struck," BLET National President Dennis 
R. Pierce said. "Now is the time to deliver a unified message to the carriers 
that their contract proposals are unacceptable to BLET's membership and that we 
stand united."

   Amid all this, there are still ongoing rail logistic issues at many of the 
Class 1 railroads. On June 13, Surface Transportation Board Chairman Martin 
Oberman said on the STB website, "We are in the middle of a rail service crisis 
and the Board continues to receive reports about persistent, acute, and 
dramatic problems in rail transportation, disrupting critical supply chains and 
shutting down companies."

   In response to the extensive problems described at the April 26 and 27 
hearing in Urgent Issues in Freight Rail Service, the STB on May 6 issued an 
order requiring the four largest U.S. railroads, BNSF, CSX, NSR and UP, to file 
service recovery plans that would specifically describe their key remedial 
initiatives and promote a clearer vantage point into operating conditions on 
the rail network.

   "The freight rail industry is currently struggling to provide adequate rail 
service, yet the service recovery plans we received are woefully deficient and 
do not comport with the spirit or the letter of the Board's order," said 
Oberman. "It is particularly disturbing that the railroads failed to comply 
with the order requiring them to file adequate service recovery plans. I had 
expected a better response from the carriers to the Board's previous order, and 
now with more explicit instructions, which should not have been needed, there 
will be no excuse for continued lack of compliance."

   It was at the hearings that all rail unions testified about the poor worker 
morale, particularly after some railroads eliminated a third of the workforce 
in less than a decade. One rail worker said that railroads are trying to do 
more with less, and it is having a negative effect on all of them. It's no 
wonder that the current contact negations have failed.

   WEST COAST LONGSHORE WORKERS STILL IN NEGOTIATIONS WITH PMA

   The Pacific Maritime Association (PMA) and the International Longshore and 
Warehouse Union (ILWU) released a joint statement regarding labor negotiations 
that started May 10. "Talks are scheduled to continue on a daily basis until an 
agreement is reached," the statement said. Both sides also said they expect 
cargo to keep moving throughout the process.

   At midnight on June 30, the contract expires for 20,000 West Coast 
dockworkers at 29 U.S. ports. Both parties have said they expect talks to 
extend beyond the July 1 expiration of the existing deal. Even still, the White 
House is on standby if negotiations should worsen.

   It is important to note that when an existing contract expires, the "no 
strike" clause becomes null and void and the possibility of disruption 
increases.

   The Journal of Commerce said in a June 14 article about the current talks, 
"In past negotiations dating back to 2002, an agreement was never reached by 
the July 1 expiration date. The 2002 negotiations were marked by ILWU work 
slowdowns and a PMA lockout of dockworkers, which resulted in costly 
disruptions. That was not the case in the 2008 negotiations, which experienced 
virtually no slowdowns."

   So, the question remains: How will all of these current contract 
negotiations turn out? This time around could get interesting because, given 
the years of COVID-19 struggles and current inflation, among many other issues, 
workers certainly have the upper hand.

   STB April 26 and 27 Rail Service Hearings: 
https://www.dtnpf.com/agriculture/web/ag/blogs/market-matters-blog/blog-post/202
2/05/02/stb-rail-service-hearing-exposes

   Years of Contract Negotiations Between Railroads and Workers Stall: 
https://www.dtnpf.com/agriculture/web/ag/blogs/market-matters-blog/blog-post/202
2/06/20/years-contract-negotiations-workers

   West Coast Longshore Negotiations Have Begun on Soon-to-Expire Contract: 
https://www.dtnpf.com/agriculture/web/ag/blogs/market-matters-blog/blog-post/202
2/06/13/west-coast-longshore-negotiations

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow her on Twitter @MaryCKenn




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