Will create single north-south railroad line serving North American market 

The biggest news on the shipping front over the past week occurred Sunday with the announcement that Canadian Pacific Railroad is acquiring Kansas City Southern, the smallest of the U.S. Class 1 railroads, in a deal that will create the first single railroad network serving all three North American nations. 

News reports put the cost the merger at $25 billion, while others reported it at $29 billion, including stock transfers. KCS shareholders are projected to own about 25% of CP stock if and when the transaction is completed. The new merged railroad will be called Canadian Pacific Kansas City. The deal still needs approval by the U.S. Surface Transportation Board (STB) and Mexico’s national rail regulatory body, which may be completed in mid-2022.     

CP President and CEO Keith Creel will serve as the head of the new railroad. Creel told listeners on a shareholders and media call that the merger is “not about cuts, line rationalizations … it’s about growing the network” to serve a growing market buoyed by the new U.S.-Canada-Mexico Trade Agreement. 

The two railroads share a rail yard in Kansas City. A connected single railroad could be expected to offer more efficient service for grain and soy commodity bulk movements from Canada and the northern Midwest states deeper into Mexico. Both railroads have substantial intermodal container shipping operations. Although the merger will not bring about more direct new east to West Coast service, KCS does connect to the southern Mexico west coast port of Lazaro Cardenas and to U.S. ports on the Gulf of Mexico. The line can be expected to provide intermodal service from Mexico’s growing manufacturing centers to Chicago and the Upper Midwest. 

Go here for more detailed coverage in Freightwaves, and here for more coverage by Bloomberg News via Chicago Business. 

Shippers monitoring Montreal dockworkers stalemate
A long-brewing dispute between the dockworkers union at the Port of Montreal and the Maritime Employers Association took a turn for the worse Sunday.    

The union’s 1,125 dockworker members voted by an overwhelming 99.71 percent to reject the latest offer that the employers said was their “final offer.” The union has not yet voted to strike and plans to go back to mediators.    

Earlier recent news reports said some ocean container carriers had begun diverting container cargo to other eastern Canadian ports including Halifax and Saint John’s in anticipation that there might be a strike. 

Canadian Pacific and Canadian National railroads provide intermodal container service from U.S. Midwest and Upper Midwest states to Montreal port that runs around Chicago and across Michigan and does not require shippers to use two railroads, as they often do to reach East Coast U.S. ports. 

Go here for coverage in the Montreal Gazette. 

CNBC: Ocean carriers rejected $1.3 billion in U.S. ag exports
CNBC released more follow-up research last week on ag export container rejection by ocean container carriers during the second half of last year. The business news network found the carriers rejected or avoided handling a potential $1.3 billion in U.S. ag exports from July through December. 

“Carrier practices are not only inflicting significant financial damage to U.S. exporters and importers, but are extremely short-sighted,” Peter Friedmann, executive director of the Agriculture Transportation Coalition, told CNBC. “Those practices are causing U.S. exporters to lose foreign customers and setting the stage for the ocean carriers themselves to lose significant business in the future.” 

SSGA members have found that containers became much less available for exporters at the end of October, November and December during that period, and for some carriers up through the first quarter of 2021. 

While the congestion at the ports of Los Angeles and Long Beach gets much of the attention for the current container shipping woes, the Northwest Seaport Alliance, comprised of the ports of Seattle and Tacoma, which serve many SSGA members, told CNBC it also suffered a large loss in exports. In 2019, the ports shipped 913,332 containers of full exports. In 2020, that number dropped to 790,620 containers. 

“Our exporters are suffering,” John Wolfe, CEO of The Northwest Seaport Alliance, told CNBC. “We have spoken with our terminal operators and carriers about this issue and there is more work to be done by all in order to address the extreme challenges faced by our export community.” 

Federal Maritime Commission chairman Louis Sola told CNBC, “I can say for a fact that some carriers have decreased their exports in return for empties (mainly the European lines)  while other have made a conscious effort to pick up the slack and increases their exports in 2020 (mostly the Asian lines),” said Sola. “I do find this most interesting and warrant that it requires further discussion.”   

Go here for more detailed coverage by CNBC. 

Compiled by Bruce Abbe, SSGA adviser for trade and transportation

On Monday, the Specialty Soya and Grains Alliance issued to its members its second Global Markets Transportation Advisory in the last 11 months to provide an update about the current state of containerized soya and grain shipping and the impact the crisis is having on U.S. exporters, along with SSGA’s efforts and appeals for action and change.    

This advisory was written on behalf of SSGA’s Competitive Shipping Action Team as a resource for members to better understand the situation and to communicate to their overseas customers what is happening. We encouraged them to pass this message along to others, and you can do the same by downloading the advisory here. 

By Bruce Abbe, SSGA Strategic Adviser for Trade and Transportation

The current crisis in global container shipping continues, and the end line seems to keep moving further out.

Today, representatives of the Specialty Soya and Grains Alliance (SSGA) participated in a virtual meeting, as part of a large working coalition of national agriculture organizations, with the Federal Maritime Commission (FMC) in an effort to impress upon regulators the urgency ag exporters are facing as they wait for supply chains to get unclogged and moving again.

SSGA reached out to member exporters late last week and received specific feedback on problems member shippers are experiencing inland and at the ports that the organization will be sharing with the FMC.

Meanwhile, the international business news media continues to become aware of the broadening impact of the crisis:

‘War of words’

“War of words escalates as exporters scramble for scarce containers,” Freightwaves reported last week. The problem of ocean carriers starting to ship containers empty back to Asia and denying space and equipment for ag exporters, first brought under the spotlight by SSGA in October, is now being documented and getting attention of more government leaders.

Global food crisis

“Food is piling up in all the wrong places, thanks to carriers hauling empty shipping containers,” Bloomberg news reported last week in a story about the crisis upending global food trade.

SSGA Executive Director Eric Wenberg was quoted in the story and noted the shipping problems will soon lead to higher prices for food products in Asia because of the logistics problems confounding the supply chains. Food price inflation, if it starts to kick in, can lead to impact on the overall global economy, Wenberg warned.

Container supply

Getting more containers into the system alone will not be enough to fix the global logjam, experts say. Ocean carrier Hapag-Lloyd CEO Rolf Habben-Jansen told the Journal of Commerce that while HL added some 300,000 TEU of containers in 2020, the accelerated production of containers “will provide only limited relief to supply chains out of Asia.”

Worsening port congestion on the U.S. west coast and European port hubs is putting a big kink in the chains. “Rising demand can’t stop blank sailings,”, JOC reported, as carriers apparently are prepared to cancel sailings despite demand if they can’t get through-put at the ports

Hapag is implementing a “comprehensive schedule recover plan” to get its ships back into their intended schedules, Habben-Jansen said. Unfortunately, he added, that plan “will result in some services not having a sailing for one to two weeks,” even though the vessels will not be idle during that time.

Clogged until late spring?

Terminal operators at the leading west coast ports of Los Angeles and Long Beach told Journal of Commerce they may not be able to dig out of the backlog of record container volumes, congestion and catch-up to vessel schedules at the ports until late spring.

“Terminals are full. There’s nowhere to put the containers. We’re 35 percent below what we normally do on deliveries (to truckers),” Ed DeNike, president of terminal operator SSA Containers, told JOC.

Labor shortages are now a critical problem with more dockworkers quarantined due to COVID, too: “The single biggest thing we can do is vaccinate,” Weston Bar, president of the Harbor Trucking Association said.

Executive order coming?

There are news reports just out that President Biden is preparing an executive order calling on several federal departments, including Homeland Security, Commerce, National Security Council and others to review critical supply chains and reduce U.S. dependence on imports for important pandemic-related supplies. The plan noted the U.S. is vulnerable across a range of supply chains besides medical supplies and “dangerously dependent on foreign suppliers.”

Of note, all of the major international steamship container lines are owned by foreign entities. It’s not only a matter of where important goods are manufactured; it’s also how we get critical cargo, including food, delivered to our country and to our foreign customers and partners.