DAILY NEWS Nov 11, 2012 8:34 PM - 0 comments

Shippers need months to adjust to labor disruption: Canadian Tire's McKenna to CITT

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By: Lou Smyrlis

HALIFAX, NS – The potential of a dockworkers strike shutting down deliveries along the US Atlantic and Gulf coasts is causing shippers to reconsider their transportation strategies for 2013, says Neil McKenna, vice president, transportation, Canadian Tire.

Tense negotiations between the US dockworkers union and the organization for shipping companies broke down in late August but were then extended for 90 days, through Dec. 29. The collective bargaining agreement between the International Longshoremen's Association (ILA) and the US Maritime Alliance (USMX) was set to expire on Sept. 30. While the move to extend the deadline prevented a strike before the Christmas season, McKenna said shippers can’t just wait and hope for the best.

“As a shipper, it’s the threat of a strike or lockout that causes shippers to move (to alternative ports). Forty eight hours notice (about labor disruption) is not enough. We need to be moving to unaffected ports months in advance,” McKenna told shippers and carriers attending the Multi-Modal C-Suite Panel at CITT’s Reposition 2012 conference this week.

Whether containerships carrying Canadian Tire’s globally sourced goods will be able to call on ports along the US Atlantic and Gulf coasts or not (talks on major sticking points are still taking place), another issue will be pricing. Prior to McKenna, the Modal C-Suite Panel heard from Rudy Mack, who served as president and CEO of Hapag-Lloyd (America) from 1999 to 2007. Mack, now a consultant, painted a grim picture, stating that the globe’s ocean shipping lines are bleeding badly with no immediate relief in sight.

A combination of excess capacity and volatile rates is staining profit ledgers in red ink and can only lead to further industry consolidation and possibly further government intervention, Mack said. The excess capacity has placed considerable downward pressure on rates, except in situations where marine lines attempt to capitalize on things such as the prospect of dockworker strikes shutting down ports in a particular region by raising rates to alternative destinations.

“They are seizing on anything they can get in addition to the base rate,” Mack said.

The vast proportion of transpacific shippers surveyed in mid October by American Shipper magazine said they were advised by their carriers they would be hit with sizable port congestion surcharges if US East and Gulf coast ports were shuttered by the dockworkers' strike.  McKenna, however, said Canadian Tire’s strategy is not to ride the ebb and flow of the market but opt for 2-3 year deals.

“We don’t chases prices up; we don’t chase prices down,” McKenna affirmed.

At the same time, McKenna’s advice to better carrier-shipper relations was to understand  cost structures and be fair with rates.

“If we are bringing in something offshore to sell, there is only one margin and everyone wants a piece of that. But nobody benefits from driving supply chain partners out of business. Be fair with rates,” he said.

McKenna was joined on the blue-chip panel by Jeff Cullen, CEO Bellville Rodair;  Rudy Mack, founder Rudy Mack Associates; Jean Jacques Ruest, executive vice president & chief marketing officer, CN Rail, Doug Harrison, COO of Day and Ross Transportation Group, and Lise Marie Turpin, vice president, Air Canada Cargo.

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