November Potential Rail Strike Outcome | Advisor Pulse
November 21, 2022
December 2, 2022 – Update
Summary: Shippers should not expect any service disruptions from the rail-labor negotiations, as Congress forced a resolution.
The House of Representatives and the Senate passed legislation to force the railways and unions to agree to the tentative deal reached in September, blocking a potential rail strike. The bill is expected to be signed by the President before the December 9th deadline.
Leading up to the deadline there were little to no service cuts to the railways. If President Biden signs the bill today, proposed service cuts as early as this weekend will not occur.
The largest disagreement in the House's bill was seven days of paid sick leave, which the Senate rejected.
November 29, 2022 – Update
Summary: A rail strike is not immediate, but shippers should prepare a contingency plan if congress does not intervene, or a deal is not reached by December 9th.
After the two final unions rejected the tentative deal agreed upon in September, the following events have occurred:
President Biden and the 27 trucking associations have called on congress to intervene on a potential rail strike. President Biden does not believe he will be able to broker a deal and the two sides are unlikely to come to an agreement.
Speaker Nancy Pelosi said the House of Representatives will hold a vote on Wednesday, November 30 to pass legislation to avoid a strike. The legislation will also need to be passed by the Senate. Congress has three options:
Force the unions and railways to ratify the deal agreed upon in September.
Extend the strike deadline and order negotiations to continue for a certain period.
Send the dispute to outside arbitrators.
If congress does not have a resolution or a deal is not complete by the end of the week, shippers should expect rail service cuts to begin, starting with highly sensitive freight including refrigerated shipments. This would likely influence truckload spot rates as freight will likely shift to over-the-road. Energy prices and supplies could be impacted as crude, refined products, and other energy-related commodities transported over the rail would need to find alternative modes of transportation.
November 21, 2022 – Original Post
Summary: The final two unions reported their vote results and there is no threat of an immediate rail strike, until December 9th. Shippers should be prepared for service cuts before the deadline for sensitive freight, such as high security, high value, and temperature-controlled shipments.
On Monday, November 21st the two final unions reported their vote results. The largest union, SMART Transportation Division, rejected the tentative deal that was agreed upon in September, becoming the fourth union to reject the deal. Eight unions ratified the proposed deal from September. The four unions that rejected the deal: Brotherhood of Maintenance of Way Employees Division of the International Brotherhood of Teamsters (BMWED), Brotherhood of Railroad Signalmen (BRS), The International Brotherhood of Boilermakers (IBB), and SMART Transportation Division (SMART-TD) reported they are eager to negotiate a new a deal ahead of the deadline.
Three of the four unions agreed to a “status quo” period to continue operating until December 9th, with the Brotherhood of Railroad Signalmen whose deadline is December 4th. It is likely they will extend their deadline to December 9th to align with the other unions. If a deal is not reached by December 9th, the unions plan to go on strike, disrupting both rail and intermodal networks and could cause capacity constraints across all other modes of transportation.
There are two options to avoid a strike if a deal is not reached by the deadline:
The Biden administration will attempt to broker a deal between the two sides to avoid a strike, like the outcome in September.
Congress will step in, pass legislation, and force the two sides to agree on the tentative deal reached in September or an alternate deal, such as the one proposed by the Presidential Emergency Board.
Impact to service in September
In September, the intermodal (IM) mix in the Breakthrough Ecosystem dropped considerably (see the chart below) and rail cars were stalled in preparation for a potential strike. This was short-lived, however, as shippers increased their IM volume quickly once a tentative deal was reached. The service cuts took approximately two weeks to resume at full capacity. Even if a strike does not occur in December, we can expect to see a similar reaction to what we experienced in September.
Breakthrough will provide further guidance on these market developments as December 9 approaches, including during our Freight Advisor webcast on December 7 at 2 P.M. CST. If you have a question or comment, please contact the Applied Knowledge team at AppliedKnowledge@BreakthroughFuel.com.