11 September - 17 September

President Biden Announced Tentative Agreement Between Rail Worker Unions, Rail Companies Averting Possible Strike

Spotlight on the tentative agreement between rail worker unions and rail companies that averts a possible strike by thousands of freight railroad workers.

Highlights on increasing revenue per nautical mile on the east-west transatlantic trade lanes, the Port of Savannah crossing the 1 Million TEU mark this fiscal year, and more.

Trending discussion on inflation remaining a heavy burden for Americans, with the possibility of disrupting supply chains further.

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Supply chains globally have faced various disruptions over the last couple of years. While port congestion and COVID-induced lockdowns have been persistent problems, more recently, workers across multiple ports have been demanding better conditions, and labor unions have been negotiating with authorities over pricing woes. Most recently, these disruptions have spilled into the railroads, with workers threatening to strike. President Biden announced that rail workers unions and rail companies have finally come to a tentative agreement.

A possible strike by tens of thousands of freight railroad workers could further disrupt a strained supply chain and cause economic damage, and is not completely off the charts. The industry had failed to reach a contract agreement with two unions representing much of the workforce. Since a federally mandated 30-day “cooling off” period ended today (Friday this week), strikes and lockouts were a possibility. 

In July, Mr. Biden established an emergency board to help mediate the dispute between the industry, which includes six of the largest freight rail carriers, and about a dozen unions. Last month, that board recommended a resolution with a cumulative raise of 24% from 2020 through 2024, including an immediate 14% wage increase covering the first three years. While most of the unions agreed to the proposal, pending a vote of their membership, two major unions were holding out for improvements to working conditions.

The tentative agreement reached at the nick of time this week comes as a respite, with some demands from the unions having been heard by rail companies. Reporters from The Washington Post revealed details of that tentative agreement on Twitter. Rail workers will finally receive sick leave without being subject to penalties, consisting of unpaid leave and one additional paid day off, according to the Post’s sources.

Key Takeaway

Rail accounts for about 28% of U.S. freight movement, second only to trucking’s nearly 40%, according to federal data. A disruption could be far-reaching, affecting a wide range of goods. Trade groups representing the agricultural industry and manufacturers of consumer products said disruptions would hurt their members and had called on Congress to intervene if necessary. 

The Association of American Railroads, a freight rail industry group, had mentioned disruption to service would cost more than $2 billion per day in economic output, idle thousands of trains, and result in widespread product shortages and job losses. Clearly, all parties needed to come to a consensus in order to ensure there are no strikes and that the supply chain functions smoothly. While a tentative agreement has been reached, it remains to be seen if rail workers are actually happy with the terms and if the idea of a labor strike would be dropped completely.

Highlights

  • Alphaliner has crunched the numbers to work out the revenues per nautical mile on the main east-west trade lanes with the transatlantic coming out on top by some distance. For the transpacific routes, revenues are now at 73 cents per nautical mile, while for the transatlantic routes, the figure stands at 217.9 cents per nautical mile.

Trending

As demand cools across the globe, inflation can be felt by various economies, with the cost of daily necessities increasing. Supply chains too are experiencing inflationary setbacks, as they try to sell off excess inventory languishing in warehouses across the US. Inflation has seemingly slowed for a second straight month due to a sharp fall in petrol prices. Yet, excluding energy, most other items got more expensive in August, a sign that inflation remains a heavy burden on American households.

Consumer prices surged 8.3% in August compared with a year earlier, down from an 8.5% jump in July and a four-decade high of 9.1% in June. On a monthly basis, prices rose 0.1%, after a flat reading in July. Excluding the volatile food and energy categories, so-called “core prices” jumped 0.6% from July to August — up sharply from 0.3% the previous month and dashing hopes, for now, that core prices might be starting to moderate.

In the 12 months ending in August, core prices jumped 6.3%, up from 5.9% in July. Rent, medical care services, and new auto all grew more expensive in August. Groceries continue to rise rapidly, jumping 0.7% from July to August. In the past year, they have soared 13.5% — the biggest 12-month increase since 1979.

Snarled supply chains, Russia’s invasion of Ukraine, and widespread shortages of items like semiconductors have been key factors in the inflation surge. In a vicious cycle, as inflation surges, supply chains are bound to be affected, and transportation costs are inevitably impacted.

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