Labour Strikes in the North American Ports—Two Countries, Two Paths

The International Longshore and Warehouse Union's (ILWU, the Labour Union) strike after negotiations stalled with the BC Maritime Employers Association (the Employer’s Association, the organization representing the interests of marine operators in British Columbia, Canada), has caused operations to shut down at several ports on the west coast of Canada from the beginning of July 2023. The major affected ports are the Port of Vancouver, the largest port in Canada, and terminals the Prince Rupert Port Authority operates. The containerized goods transported via these two ports serve not only Canada but also the U.S. Midwest region, with goods transported to these destinations via efficient intermodal rail connections.

The core issues pending resolution between the Labour Union and the Employer’s Association are related to the contracting out of maintenance work and pay. DBRS Morningstar’s view is that the strike by ILWU Canada is unlikely to last long, given the negative impact it has on both the union members and the terminals. The potential impact on the provision of essential goods also makes it less likely that the strike will continue for long. While the disruption in trade will present a drag on GDP in July, there is unlikely to be a noticeable impact on third quarter GDP.

Over the short term, shipping lines might bypass the Canadian West Coast altogether, albeit at higher costs and dependent on the support of the labour unions in the U.S. Most of our rated Issuers are geographically diversified or have limited exposure to the affected regions. Considering the strong fundamental business factors and the financial coverage metrics that support the current credit profile, we expect the effect of the strike to not be material for our rated portfolio. While we view the direct impact of the strike itself on the terminals as temporary to container terminal operators, it adds to the post-pandemic challenges in the sector.