By Abhinav Parmar

July 7 (Reuters) - UPS, FedEx and other private parcel carriers are busy cornering a bigger share of the nearly $17 billion Canadian delivery market, while government-owned Canada Post copes with labor turmoil.

Canada Post, the country's primary postal service, has been plagued by labor disruptions since last year, including during the peak holiday season as workers went on strike over pay.

The Canadian Union of Postal Workers (CUPW), representing delivery personnel at Canada Post, initiated a nationwide overtime ban in May after contract negotiations failed.

The repeated disruptions have prompted small businesses to turn to rivals and private carriers for timely deliveries, even if they are more expensive.

"For retailers who can't afford to roll the dice on labor peace, their T-shirts and iPhone cases hop over to brown or purple vans (UPS/FedEx) at the first whiff of trouble," said Michael Ashley Schulman, chief investment officer at wealth management company Running Point Capital.

Parcel giant FedEx told Reuters it expects "the circumstances at Canada Post may trigger an increase in demand for FedEx services."

The company may offer special rates, add delivery vehicles, re-work routes, reallocate resources and open temporary sorting centers to handle the additional demand.

UPS declined to divulge its plans to boost capacity.

Calgary-based Lisa Graham, who runs a small e-commerce based business called YYC Beeswax, told Reuters her business relied heavily on Canada Post's affordable small-package rates for domestic shipments.

But after the business suffered some losses during last year's holiday season strikes, Graham turned to UPS and FedEx to keep deliveries running, and enlisted local courier services to supply domestic customers, who make up 70% of her sales.

"Anything that's going to take over two days, we are spending extra to ship with them (private courier services)."

Last year's strikes cost small and medium-sized businesses over $1 billion in lost sales, the Canadian Federation of Independent Business said.

Michael Cox, who imports Irish sweaters, textiles, jewelry, and other goods from the UK to his Ottawa-based shop, said he had to halt business during last year's strikes, as Canada Post was its sole logistics provider — causing significant losses.

The Canadian courier, express, and parcel market is valued at $16.74 billion and could hit $21.55 billion by 2030, according to Mordor Intelligence.

The impact of the ongoing uncertainty, including last year's strikes, has been significant on our business, a Canada Post spokesperson said.

"Since the union restarted their strike action in May 2025 once the collective agreements expired, we have lost almost 60% of our business."

Canada Post's market share plunged to 26.7% in 2024 from 62% in 2019, according to the company's annual report, despite a post-pandemic e-commerce boom in deliveries.

It lost $208 million due to last year's 32-day strike.

"If CUPW's contract slug-fest drags on, Canada Post's share could drop into the teens by December 2026," Schulman added.

(Reporting by Abhinav Parmar in Bengaluru; editing by Arpan Varghese and Shinjini Ganguli)

((Abhinav.Parmar@thomsonreuters.com;))