Canada’s Two Major Railroads May Strike Next Week, Impacting U.S. Supplies

Canada’s two largest railroads are beginning to halt their shipping operations due to an escalating labor dispute with the Teamsters union. This situation raises concerns about potential lockouts or strikes, which could significantly disrupt cross-border trade with the United States.

Canadian Pacific Kansas City (CPKC) and Canadian National Railway, which transport millions of tons of freight across the border, have ceased accepting certain shipments of hazardous materials and refrigerated goods. Both companies are prepared to lock out Teamsters Canada workers starting Thursday if new agreements are not finalized.

Starting Tuesday, CPKC will stop all shipments originating in Canada as well as those that begin in the United States bound for Canada, according to a statement made on Saturday. Canadian National also announced on Friday that it would no longer accept container imports from U.S. partner railroads.

Jeff Windau, an industrial analyst at Edward Jones & Co., indicated that while he expects any work stoppages to be brief, extended interruptions could lead to serious supply chain problems. He noted, “If something were to carry on more of a longer-term nature, then I think there are significant potential issues given the amount of goods that are handled each day.” Windau highlights the essential role that railroads play in the economy.

Together, these two railroads handle around 40,000 carloads of freight daily, with a total value close to $1 billion. Any disruption could heavily impact the shipment of fully built automobiles and auto parts, chemicals, forestry products, and agricultural goods, particularly with the harvest season approaching.

Although both railroads have extensive operations in the U.S. and CPKC additionally serves Mexico, they confirmed that those activities will continue even in the event of a work stoppage. CPKC expressed its commitment to preventing a disruption that could harm Canada’s economy and international standing. “However, we must take responsible and prudent steps to prepare for a potential rail service interruption next week,” remarked Patrick Waldron, a spokesman for CPKC.

The decision to shut down the network is designed to facilitate the removal of hazardous materials before any potential stoppage occurs. Union representative Christopher Monette stated that while negotiations are ongoing, the situation appears to have shifted from a possible strike to what is “near certain lockout” by the railroads.

Discussions are expected to take place on Sunday between CPKC and the union, which represents nearly 10,000 workers across both railroads. The company emphasized its intention to negotiate in good faith.

On its part, Canadian National noted that no meaningful progress has been made and expressed hope that the union would engage constructively in an upcoming meeting scheduled for Saturday. “CN wants a resolution that allows the company to get back to what it does best as a team, moving customers’ goods and the economy,” the railroad stated.

The negotiations have been in process since the previous November, with contracts initially expiring at the end of 2023. Extensions were granted as discussions progressed. The union has highlighted crew scheduling, rail safety, and worker fatigue as the primary obstacles to reaching an agreement.

While Windau mentioned that the trucking industry currently has surplus capacity, potentially allowing for some diversion of shipping volumes, he cautioned, “You’re not going to be able to replace all of that with trucking.” The complexities and challenges posed by such freight cancellations underscore the delicate balance involved in international trade and logistics.