The two largest railway firms in Canada, Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) are about to experience a simultaneous labour strike for the first time. The union says it is prepared to declare a strike for that day, while the employers warn they will begin locking out employees in the wee hours of Thursday if they cannot agree.
The Teamsters union is requesting more pay and benefits, along with measures to better manage employee weariness and schedule crews. According to the Railway Association of Canada, the two rail lines move almost USD 1 billion worth of commodities every day, meaning they have a significant impact on the Canadian economy.
As per the latest updates, Canadian National Railway and Canadian Pacific Kansas City had locked out their workers and shut their networks in the country early on Thursday after last-minute talks with the Teamsters union failed to avert a costly stoppage, a stoppage which will put the country’s freight rail network to a grinding halt. Here are some examples of how this shutdown will impact things.
Navigation
A freight train halt won’t immediately affect how most people get around. However, there could be an impact on more than 32,000 rail commuters in Vancouver, Toronto, and Montreal. Since dispatchers and 3,200 other employees have walked off the job, some commuter lines that operate on CPKC tracks will be suspended, according to transit authorities.
Canada, the world’s second-largest country by area, relies heavily on railways to transport grain, automobiles, potash, coal and other goods. The railways transport about 380 billion Canadian dollars (USD 277 billion) worth of goods and commodities annually, and the impact of the rail stoppage is expected to be felt across North America. Rating agency Moody’s estimates the simultaneous stoppage could cost the Canadian economy 341 million Canadian dollars per day.
A work stoppage could impact the following commuter lines: Exo’s Candiac, Saint-Jerome, and Vaudreuil/Hudson lines in Montreal; Metrolinx’s Milton line and Hamilton GO station in the Greater Toronto Area; and TransLink’s West Coast Express in the Vancouver area.
According to a spokeswoman, Via Rail would also experience service interruptions along a route that passes through Sudbury in northern Ontario.
Supermarkets
What’s on food store shelves may also change in response to the potential of a rail stoppage, particularly if the conflict continues.
According to Michael Graydon, CEO of the industry group Food, Health, & Consumer Products of Canada, some perishable food is already not being carried by rail.
According to Graydon, the shipment of frozen foods like French fries could have already ceased. He added that meat and fruit could also be impacted. For instance, bananas are frequently transported by
rail from the United States to Canada. He also stated that areas of Western and Atlantic Canada are probably going to be the most impacted.
Graydon also expressed concern that the kind of “consumer stockpiling” that was shown during the COVID pandemic might exacerbate any future shortage and increase the burden on providers.
Little Businesses
If the strike continued, many firms would suffer from a standstill, especially small ones that had a smaller inventory and fewer possibilities for obtaining more. According to Fraser Johnson, a supply chain expert professor at Western University’s Ivey Business School, small firms “don’t have the flexibility to be able to divert freight as major corporations.”
Stores such as Walmart, he claimed, could create “contingency plans” to transport goods via different routes in the United States “and back up into Canada to its numerous stores.”
The Canadian Federation of Independent Enterprises’ president, Dan Kelly, stated that small enterprises are sometimes already experiencing the consequences.
He stated, “There would be a significant impact.” The retail sector plays a significant role in the transportation of commodities into Canada and helps them reach their ultimate destination.
What About The Farmers?
Canada’s agriculture industry, especially in the Prairies, depends largely on rail to export its goods.
Vice-president of the Wheat Growers Association and farmer Stephen Vandervalk, who lives close to Fort Macleod, Alberta, described the situation as “totally out of control.”
“Harvest season is now. We’re joining forces. Elevators are refusing to take grain and are halting delivery, which is why bids are declining daily, Vandervalk told CBC.
The industry lobbying group Fertiliser Canada cautioned that the mere possibility of a work stoppage has already taken a toll.
Karen Proud, CEO of Fertiliser Canada, said in a statement that “farmers throughout the world rely on Canada’s fertiliser sector to optimise crop yields, and the fertiliser business relies on rail to transport our products to market.”
Fertilisers account for the third-highest volume among commodities shipped by Canadian railways, and 75% of all fertiliser produced and used in the country is moved by rail. The railways move an average of 69,000 metric tons of fertiliser product per day, equivalent to four to five trains daily.
Fertiliser Canada, which represents producers such as CF Industries and Nutrienm has estimated 55 million Canadian dollar to 63 million Canadian dollar per day in lost sales revenue from disruptions of all rail services. Top potash producer Nutrien said the stoppage could hamper its full-year potash sales.
“As much as 94% of grain is shipped by rail, according to Grain Growers of Canada. A stoppage would crimp shipments of US spring wheat from Minnesota, North Dakota and South Dakota to the Pacific Northwest for export. Nearly three dozen North American agriculture groups have warned a simultaneous stoppage would be particularly severe on bulk commodity exporters in both Canada and the United States,” stated Reuters.
The Supply Chain
Fraser Johnson of Western University stated that the automotive industry and Canada’s ports would be among the sectors most impacted by a slowdown, in addition to agriculture.
Rail, according to Johnson, is “a vital component of our supply chain that manages, say, half of all Canadian exports, but it’s extremely critical to a number of [domestic] businesses.”
For example, he stated that automakers “still ship out automobiles from their assembly plants via rail and undoubtedly receive a lot of components from suppliers via rail.”
The massive global shipping company Maersk stated that although it is developing backup plans, it is still carrying cargo into Canadian ports at this time.
A few businesses only use rail to distribute their goods. For example, Toronto-based Chemtrade Logistics claims to supply chlorine for 40% of the drinking water in Western Canada and a large portion of the western United States.
Its product cannot be transported by ship or vehicle, and the quantity that can be stored is limited by safety laws. The Chemistry Industry Association of Canada’s CEO, Bob Masterson, told The Canadian Press that if a work stoppage continued for more than a week, the shortage of chlorine exports may have an impact on some towns’ water supplies.
“About 85% of US-Canada cross-border freight in either direction is primarily handled by Canadian trucking carriers. Truckers say they can absorb some of the increased demand, but cannot replace long-haul rail distribution, especially for bulk commodities such as coal, potash and food grains,” Reuters noted.
US freight forwarder CH Robinson said, “Truckload shippers with spot freight, as well as rail shippers looking to convert to truck, should expect not only higher costs but also longer lead times.”
Other Repercussions
Johnson stated that it is improbable that a shutdown would have an instant impact on the cost of goods. In November 2019, about 3,000 workers, represented by Teamsters Canada, went on an eight-day strike at CN.
Even though the strike stopped shipments and caused industry-wide disruptions across the nation, RBC analysis indicates that the total economic impact was still “very minimal.” According to RBC, the strike only had a negative impact of 0.1 percentage points on annualised quarterly growth.
According to Johnson, a complete shutdown of both train lines this time would have greater effects, at least on the industries directly impacted.
“The main effect will be the possibility of decreased sales for companies, as well as job losses and salary reductions in certain sectors,” he said.
However, coal is one of Canada’s top bulk commodities transported by rail, with more than 30 million metric tons moved annually, according to the Coal Association of Canada. The railway strike could result in shipment disruptions, thereby affecting the operations of mining giant Glencore and its majority-owned unit, Elk Valley Resources.
On the other hand, an average of 94,400 barrels per day of crude oil has been exported via rails so far in 2024, according to the Canada Energy Regulator. The strike is, however, unlikely to significantly reduce oil exports to the United States, due to excess capacity on Trans Mountain and other pipelines.
With exports worth 45.5 billion Canadian dollars completed in 2022, as per Canadian government data, the forest sector has emerged as an important contributor to the country’s economy. Pulp producer Mercer International said it was working on contingency plans including alternative transport methods in anticipation of the rail stoppage, while Conifex Timber is reducing its sawmill operating schedule at its Mackenzie, British Columbia site. Canadian National Railway is North America’s largest rail carrier of forest products, according to its website.
The United States imported and exported transportation equipment worth about USD 73 billion respectively in 2023 from Canada, according to the International Trade Administration. Canadian National’s website said it handles over 2 million finished vehicles on an annual basis, catering to more than 12 North American vehicle assembly plants. Canadian Pacific Kansas City, on the other hand, caters to about 90% of automotive assembly plants in Mexico.