An unprecedented rail stoppage is now underway in Canada. This comes after the Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) locked out more than 9,000 union rail employees on Aug. 22.
The Teamsters Canada Rail Conference (TCRC) union that represents the rail workers employed by CN and CPKC declared a strike at the same time, which is bad news for North America's complex supply chains.
"Canadian National has formally locked out employees represented by the Teamsters Canada Rail Conference as of Aug. 22 at 00:01 ET, after the union did not respond to another offer by CN in a final attempt to avoid a labor disruption," CN wrote in a press release.
"This offer improved wages and would have seen employees work less days in a month by aligning hours of service in the collective agreement with federally mandated rest provisions," claimed CN. "The offer also proposed a pilot project for hourly rates and scheduled shifts on a portion of the network as CN continues to believe this is a better and more predictable framework for our employees. Without an agreement or binding arbitration, CN had no choice but to finalize a safe and orderly shutdown and proceed with a lockout."
CPKC released a similar press release, suggesting it had "bargained in good faith, but despite our best efforts, it is clear that a negotiated outcome with the TCRC is not within reach."
After its set deadline for receiving a good offer from CN and CPKC expired, the union posted on X that members "should now be manning the picket lines … and signs should indicate lockout/strike."
Rail strike in Canada likely to negatively impact the U.S.
An extended labor action could seriously upset Canada's complex rail network, sending shockwaves through the economy of the United States and possibly rekindling the inflation crisis of 2022.
A report from Bloomberg said: "As a result, some cargo has been rerouted to ports on the U.S. West Coast, which are already dealing with container volumes approaching pandemic records." (Related: Shipping costs are rising all over the world, striking a huge blow to international trade.)
According to Brendan LaCerda, a senior economist with Moody's Analytics, the lengthy labor stoppages would mess up supplies of grain, fertilizer, lumber and steel, potentially increasing prices for food, construction materials and automobiles.
"Significant two-way trade and deeply integrated supply chains between Canada and the United States mean that any significant rail disruption will jeopardize the livelihoods of workers across multiple industries on both sides of the border," U.S. Chamber of Commerce President Suzanne Clark said in a statement.
Early this week, Goldman's Jordan Alliger told its clients that "while a longer strike duration period is a possibility, we think history makes the probability of a shorter strike period much more likely (i.e., less than a week and more likely a few days of work stoppage once strike occurs)."
Alliger added the ongoing phased network slowdowns, shipper diversions, potential for heightened supply chain congestion and the inevitable time it will take for Canadian rails to completely reboot network operations will possibly keep near-term performance quiet.
He further said, "Using 2023's total trade value figure of ~$6.7tn as a base proxy (transborder + US-international) would imply ~$67bn-$134bn of annually disrupted trade, which would mean potential trade disruptions of ~$180mn-$370mn per day should Canadian rail strikes ensue."
Follow SupplyChainWarning.com to learn more about recent disruptions to global supply chains, including labor disputes.
Watch this episode of "Gen Zero" as host Dr. Paul Cottrell discusses a similar rail shutdown in France.
This video is from the Dr. Paul Cottrell channel on Brighteon.com.
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