Global effects of the Canadian longshoremen strike

ON NOV 4, the International Longshore and Warehouse Union Local 514 walked off the job in a strike, forcing the ports of Vancouver and Prince Rupert to grind to a standstill. In the wake of the 13-day strike in July 2023 which resulted in months before the backlog could be cleared and normal port operations resumed, logistics professionals are worried about the long-term impacts on trade and goods that are vital for the North American markets, especially with the holiday season approaching.

But more than that, the longshoremen strike in Vancouver and other ports across the province has the potential to send ripples far beyond Canada’s borders, impacting global supply chains in multifaceted ways as we head into 2025.

Immediate disruptions in trade

In an interconnected global economy, supply chains stretch across continents, weaving through a complex network of suppliers, manufacturers, and logistics providers. Vancouver, with its strategic location on the Pacific Rim, plays a pivotal role in these networks as one of North America’s largest and most significant ports – alongside the port of Prince Rupert, handling some 20 per cent of US imports.

The Port of Vancouver handled some 2.5 million TEUs (twenty-foot equivalents) in 2023, with an estimated CA$840 million (S$800 million) worth of trade flowing through the port each day, reflecting its role as a critical entry and exit point for goods between North America and Asia. With Canada already facing container capacity constraints, due to longshoremen stopping work at several container terminals at the Port of Montreal, a further strike or coastwide lockout could have severe impacts on port operations and efficiency up and down the coast.

Data from the Infor Nexus network shows how port times are already significantly higher than the norm for Vancouver, the eighth-largest port in North America by volume. Dwell times soared from six days in September to 17 days in October, indicating that any further disruption could be devastating, with backlogs that will take months to clear.

In addition, according to the Journal of Commerce, both the ports of Seattle and Tacoma struggled to maintain efficient operations after the sudden surge of container volumes due to cargo diversions linked to the brief early-October longshore strike, and a further strike could threaten to overwhelm them entirely.

With retailers already causing a surge in imports as they scramble to restock inventory in preparation for the labour issues caused by the strikes, even a temporary closure of the Canadian West Coast trade gateway could force carriers to offload import cargo at already struggling US West Coast ports, which are already experiencing heavy congestion. This would further extend container dwell times and lengthen overall transit periods.

Ultimately, global supply chains are an intricately connected web of moving parts and components. A strike disrupts this flow, leading to immediate delays in the movement of goods. Containers pile up in terminals, and ships are forced to either anchor offshore or divert to alternative ports, which may already be operating at full capacity. This congestion results in increased transit times, impacting industries that rely on just-in-time delivery of components and raw materials.

Impact on key industries

Several industries, particularly those heavily reliant on imports and exports through British Columbia and the Port of Vancouver, feel the immediate impact.

Automotive industry: In 2023, Canada imported auto parts worth over CA$25 billion, with a significant share passing through West Coast ports. With many car manufacturers dependent on parts from Asia, delays can lead to halted production lines and increased costs due to sourcing from pricier, alternative suppliers.

Technology sector: Electronics and components, commonly transported as high-value, low-volume goods, face significant disruptions. This affects everything from consumer electronics to critical infrastructure components.

Agriculture and perishables: Exporters of Canadian agricultural products, such as grains and seafood, face spoilage risks and loss of trade relationships due to delays, while importers of fresh produce may struggle to maintain supply. In 2023, Canada exported over CA$90 billion in agricultural and agri-food products, a considerable volume moving through Vancouver.

Long-term strategic shifts

While the immediate effects of a strike are visibly disruptive, long-term consequences can lead to strategic shifts in supply chain management:

Diversification of ports: Businesses may seek to reduce dependency on any single port by diversifying their points of entry and exit. Conversely, organisations will have to weigh the balance of shifting ports as shipping costs can often increase by 15 to 25 per cent when re-routing is necessary due to port disruptions, according to recent industry reports.

Inventory management: A 2023 survey by Gartner found that 87 per cent of supply chain leaders are investing in greater resilience through supplier diversification and increased inventory levels. Had the strike, or any further disruption to standard port operations, escalated, companies might reconsider their inventory strategies, increasing buffer stocks to mitigate future disruptions, though this will come with added costs that tie up working capital.

Enhanced supply chain resilience: Organisations are likely to accelerate investments in technologies that enhance visibility and flexibility across their supply chains. This includes the adoption of advanced analytics, artificial intelligence, and Internet of Things to predict and respond to disruptions more effectively.

Economic and political pressures

The economic implications extend beyond business operations. Prolonged strikes can sometimes lead to significant economic losses, affecting gross domestic product figures, and potentially leading to government interventions. Politically, strikes highlight labour-management tensions, prompting discussions on labour laws, automation, and the future of work in the logistics sector. An analysis of past port disruptions in North America suggests economic impacts can exceed US$2.5 billion per day, emphasising the significance of maintaining operational continuity in major ports such as Vancouver.

The longshoremen strike in British Columbia and the subsequent coast-wide lockout underscores the vulnerabilities inherent in modern supply chains. While the immediate impact is characterised by disruption and delay, the episode also serves as a catalyst for change, pushing businesses towards more resilient and diversified supply chain strategies. In the long run, these adjustments may not only mitigate future risks but also drive innovation and efficiency within global logistics networks. As businesses navigate these challenges, their ability to adapt and evolve will determine their success in an increasingly unpredictable world.

The writer is senior vice-president and general manager, Asia-Pacific and Japan, at Infor