Shippers and industry groups in North America are bracing for an unprecedented shutdown of Canada’s rail network, after discussions over a revised labour agreement hit a deadlock last week.
Canada — the world’s second-largest country by area — relies heavily on trains to transport a variety of goods, such as grain, beans, vehicles, coal, and critical minerals. A stoppage of such a network, industry groups say, could inflict billions of dollars worth of economic damage.
“It’s a catastrophe. Literally nothing would move,” Greg Northey, vice president of public affairs at advocacy group Pulse Canada, says.
Discussions between Canada’s two main railway companies — Canadian National Railway (TSX:CNR) and Canadian Pacific Kansas City (TSX:CP) — and the Teamsters union have been ongoing for months. However, the rail operators said last week they would begin locking out workers on 22 August if a labour deal could not be negotiated.
Canadian National said on Friday that it had lost faith in the negotiating process, citing what it said was the Teamsters’ unwillingness to engage in meaningful talks and formally asking Labour Minister Steven MacKinnon to intervene.
The Teamsters Canada Rail Conference (TCRC) fired back at that letter earlier this week, claiming Canadian National’s request was “unfounded, unnecessary, and at the very least premature in the circumstances”.
“CN is attempting to create an artificial crisis,” lawyers for the TCRC wrote on Tuesday.
“The TCRC has not issued a strike notice for either CN nor CPKC. The TCRC desires to continue bargaining and achieve voluntary settlements or at least agree upon as much as possible with CN (and CPKC).”
Mounting pressure
In addition to the pressure from Canadian National, industry groups want the Liberal government of Prime Minister Justin Trudeau to step in, noting that Canada’s railways transport some C$380 billion ($420 billion) worth of goods each year.
“Factoring in the millions of Canadian jobs that would be impacted, the magnitude of the disruption is daunting,” the Business Council of Canada said in an open letter to Trudeau and MacKinnon.
Such groups say MacKinnon has the power to refer the dispute to the country’s labour relations board, thereby preventing a railway stoppage. The minister, however, has so far said he wants the two sides to reach a deal.
Saskatoon-based Canpotex, the world’s largest exporter of potash, says there is simply no alternative to shipping by rail. And after last year’s strikes at the Port of Vancouver and St Lawrence Seaway, the company says Canada is risking developing a reputation.
“Frequent domestic disruptions are chipping away at Canada’s reputation as a reliable, stable trading partner, and it should concern all that this played out after the Port of Vancouver strike when Russia replaced Canada as top potash supplier to important markets, like Indonesia and Malaysia,” Canpotex said in a statement.
“We are stepping up to ship more Canadian potash in light of sanctions and restrictions on Russia and Belarus, but that hinges on Canada’s railroads and ports functioning.”
In a memo obtained earlier this week by The Canadian Press, Canadian National said it had begun embargoing shipments of dangerous goods from the US — such as chlorine and ammonia — in anticipation of a strike, adding that it would halt additional commodities this week if no agreement is reached.
Canadian Pacific Kansas City says it will also temporarily ban the delivery of dangerous materials to ensure no shipments end up stranded on the tracks.
In a note to clients this week, analysts at Morgan Stanley found that each week of shipment disruptions could hit the pre-tax earnings of mining giant Glencore (LON:GLEN) by US$100 million ($152 million) or more, largely due to hindered coal shipments from its majority-owned Elk Valley Resources.
US impact
But it’s not just Canada that will feel the pinch of a strike, given the country sends around 75% of all exports to the US.
The rail networks of both Canadian National and Canadian Pacific Kansas City connect with a number of key US rail and shipping hubs, including Chicago, New Orleans, Minneapolis, and Memphis. Canadian Pacific Kansas City’s reach also extends further south, connecting with ports on both the west and east coasts of Mexico.
Minnesota-based logistics firm C. H. Robinson, which manages more than 650,000 loads across the US-Canada border each year, says it is boosting its trucking capacity on both sides.
“When all trains serving the entire country could literally be stopped on their tracks, that’s another whole level of disruption,” Scott Shannon, a senior executive at C. H. Robinson, says.
Write to Oliver Gray at Mining.com.au
Images: Canadian National Railway
