Impending Work Stoppage at Canada's Top Railroads May Disrupt U.S. Supply Chain in Coming Week

In Detroit, Canada's two largest railroads are facing the threat of shutdowns amidst a labour dispute with the Teamsters union. This dispute has the potential to cause significant disruptions to cross-border trade with the United States. Canadian Pacific Kansas City (CPKC) and Canadian National, the two major railroads in Canada, are taking precautionary measures by halting certain shipments of hazardous materials and refrigerated products.

Both railroads have issued ultimatums, warning of potential lockouts of Teamsters Canada workers if agreements are not reached soon. CPKC announced that starting Thursday, all shipments originating in Canada or headed for Canada from the U.S.will be halted. Similarly, Canadian National has already stopped container imports from U.S.

partner railroads. These actions are already having a significant impact on the flow of goods between the two countries. According to Jeff Windau, an industrials analyst with Edward Jones & Co., the work stoppages are expected to last only a few days. However, if the dispute drags on, there could be major disruptions in the supply chain. The railroads handle around 40,000 carloads of freight daily, valued at approximately $1 billion.

Industries such as automotive, chemicals, forestry, and agriculture would be severely affected, especially with the harvest season approaching. Despite the potential shutdowns in Canada, both CPKC and Canadian National have extensive operations in the U.S.

, with CPKC also serving Mexico. These operations will continue running even if there are work stoppages in Canada. CPKC emphasized its commitment to avoiding a complete shutdown that could harm the economy and international reputation of Canada.

The railroad stated that preparations are being made to deal with any potential interruptions in service. Union spokesman Christopher Monette has indicated that negotiations are ongoing, but the likelihood of a lockout by the railroads is now almost certain. The union represents nearly 10,000 workers at both railroads, and bargaining is scheduled to continue with CPKC on Sunday.

The company maintains that it is negotiating in good faith. Canadian National expressed disappointment in the lack of progress in negotiations and urged the union to engage meaningfully in finding a resolution. The company stated its desire to return to its primary function of moving goods and supporting the economy.

Negotiations have been ongoing since November, with contracts expiring at the end of 2023 and being extended during talks. Some of the main issues in the dispute revolve around company demands regarding crew scheduling, rail safety, and worker fatigue. Windau noted that while the trucking industry could potentially absorb some of the railroads' shipping volumes due to excess capacity, it would not be able to fully replace the efficiency of rail transport.

The looming threat of rail shutdowns in Canada has significant implications for cross-border trade and the economy of both countries. As negotiations continue and tensions rise, the future of rail shipping between Canada and the U.S. hangs in the balance.