Canadian freight carriers are battling unprecedented challenges to deliver goods by land, air and ocean as sweeping travel restrictions, lockdowns and surges in demand strain critical links in global and domestic supply chains.
Canada, in an attempt to contain the rapid spread of the coronavirus, has joined other countries in barring international visitors, a measure that has grounded passenger airplanes that are also crucial to moving goods such as pharmaceutical ingredients.
At the provincial level, Ontario, Quebec and British Columbia have established differing lists of essential services threatening to clog supply chains and tie up badly needed ocean freight containers, shippers say.
And panic buying at local grocery stores has disrupted the normal rates of demand, leaving trucks lined up at warehouses and distribution centres as grocers rush to fill bare shelves.
In 9/11, everything shut down, but that was a temporary situation and we knew there was an end,
Ken Singh, president of Atlas Cargo
The result is a cluster of constraints “unlike anything we’ve seen before” said Ken Singh, president of Mississauga, Ont.-based Atlas Cargo.
“In 9/11, everything shut down, but that was a temporary situation and we knew there was an end,” said Singh, whose company moves goods in 97 countries via land, air and sea. “With this one, we have no idea where the point is that it will tip over, where it will end. It’s hard to measure the calamity, because we’ve just never experienced anything like it.”
A Cargojet plane lands at the Calgary International Airport this week. The nightly volumes of freight between cities that Canadas only national cargo airlin, handles has spiked to 1.8 million tonnes, an increase of nearly 40 per cent.Gavin Young/Postmedia
Though almost every mode of transport has been shaken by the impact of the fast-moving virus, the most severe pain is being felt in airfreight, where travel bans have forced airlines to park planes and send employees home. Aside from carrying travellers, passenger planes are crucial to the quick delivery of goods including pharmaceutical and medical supplies.
“There are no passenger planes flying, so all the belly space that carried hundreds of thousands of kilos a day in cargo just doesn’t exist,” Singh said. “The hardest thing is getting things out of China by air. The rates they are charging have tripled because of the demand. Everybody is struggling, but that’s the biggest problem, getting goods out of Asia.”
For Apotex Inc., Canada’s largest pharmaceutical supplier, a combination of airfreight shortages, export controls on pharmaceutical products from India and a recently ordered 21-day nationwide lockdown in that country has significantly delayed delivery of the active pharmaceutical ingredients (API) needed to manufacture three products: the pain reliever acetaminophen, hydroxychloroquine (used to treat rheumatoid arthritis and other ailments) and acyclovir, an antiviral drug.
Apotex has enough APIs on hand to manufacture the first two products, said Jordan Berman, vice-president of global communications for the company, which fills one in five Canadian prescriptions. But it is still too early to know whether delays in obtaining API for the third will lead to supply challenges.
“About 98 per cent of our products are made in Canada, but for a small number, we do rely on APIs from India,” he said. “Most of our goods come on passenger jets and with the reduction of those flights, delays and costs have gone up. We have inventory in the country and we’re in good shape overall, but this is evolving hour by hour, whether it’s countries stopping exports or delays down the line.”
Our teams are working 18 hour days to keep the supply chain of this country moving. We wish there was a little more support
Cargojet CEO Ajay Virmani
As demand for essential supplies surges, the nightly volumes of freight between cities that Cargojet Inc., Canada’s only national cargo airline, handles has spiked to 1.8 million tonnes, an increase of nearly 40 per cent. The company has hired 50 new pilots and employees, ramped up its sanitizing and cleaning routines and boosted the pay for its workers to help cover the expense of childcare and other costs.
In all, the measures will cost the company an extra $4 million to $5 million a month, said chief executive Ajay Virmani, who has also refused more lucrative international work to focus on domestic demand.
“We have not raised our rates, we have not gone to the market because we don’t feel that’s the right thing to do,” he said. “We have asked the government for help getting basic things like masks for our pilots and sanitization materials, but we haven’t received it. Our teams are working 18 hour days to keep the supply chain of this country moving. We wish there was a little more support.”
Containers sit stacked at the DP World and Global Container Terminals Inc. in Vancouver last week. A shipping container shortage thats left everything from Thai curry to Canadian peas idling in ports may be about to get a whole lot worse as China steps up its coronavirus precautions on incoming vessels.James MacDonald/Bloomberg
Further into the supply chain, Canada’s ports and trains are once again operating normally following significant disruptions due to the rail blockades, freight companies said, but new challenges have emerged elsewhere.
To enforce social distancing, considered crucial to limiting the spread of the virus, Ontario, Quebec and B.C. have created lists of essential businesses, with B.C. going a step further by granting itself the power to take over supply chains through the Emergency Program Act.
Those moves have shuttered warehouses and distribution centres that would normally receive sea containers full of “non-essential” goods already en route to Canada, said Kim Campbell, chair of the Canadian Association of Importers and Exporters.
As shippers are forced to move the items elsewhere to be stored, the system will be further deprived of the empty containers needed to move essential items, she said.
The balanced exchange of sea containers — critical to the smooth flow of global trade — was already thrown into disarray after COVID-19 ripped through China, forcing the country to shut down most of its industry in January and February.
Incoming container traffic at the Port of Vancouver plunged 14 per cent in February, echoing losses at other major ports including the Port of Los Angeles, where container traffic fell 23 per cent.
The closure of warehouses for non-essential goods threatens to exacerbate the problem, Campbell said.
“Ocean ports, rail yards, and trucking terminals will quickly become overwhelmed with the business of undeliverable non-essential freight, which will greatly hamper the delivery of essential products that Canadians need during this crisis,” she said in a letter to Prime Minister Justin Trudeau.
What’s more, Campbell said, the discrepancies between provincial lists of essential items could leave a product badly needed in one province stuck in another. Her organization wants all goods to be deemed “essential” or, at the very least, a uniform federal definition of which goods fall into the category.
Empty shelves greet shoppers at a store in Calgary. Surging demand for food deliveries to refill grocery store shelves already has some trucking companies running at full capacity.Darren Makowichuk/Postmedia
“We’re not saying open up all the stores,” she said in an interview. “We’re saying make all products essential so we can open warehouses, products can be delivered and the system can keep functioning.”
Surging demand for food deliveries to refill grocery store shelves already has some trucking companies running at full capacity. Travel across land borders — closed to non-essential travellers — has been smooth, but the lineups at warehouses have caused long delays, said Steve Foxcroft, vice-president at Hamilton-based Fluke Transportation Group.
“The delays are at the distribution centres,” he said. “That’s the issue for us, getting things off the truck and into the warehouse.”
Trucking industry leaders are also increasingly concerned about another long-standing problem threatening supply chains: driver shortages. The job vacancy rate in trucking has soared higher than in any other industry in Canada aside from crop production as older drivers retire and the industry struggles to draw new recruits, a recent study by Trucking HR Canada and the Conference Board of Canada found.
Now, the industry is confronted with the parallel challenge of workers becoming infected or being unwilling to risk their health by coming to work, said David Carruth, president of the Ontario Trucking Association.
“The Ontario government has been doing what they can to extend licensing and permits when they come up for renewal, of helping us with the bureaucratic issues,” he said. “But when it comes to bringing in new drivers, you need someone to be trained, tested and licensed. That takes time and there’s no way to speed that process up.”
For the customers at the end of the supply chain, the snags have so far materialized in the inconsistent supply of goods in some cases and none in others, said Rob Hattin, chief executive of ProVantage Automation, an Ancaster, Ont.-based manufacturer of factory automation products.
“Some things have taken off and others just aren’t there, so you just don’t know what you’re going to get,” he said. “That’s as much of a problem as anything. It’s like baking a cake. If you have a lot of eggs and no flour it’s not going to happen.”
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