Labor Fears Ease on Canadian Rails

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--While much of the market's attention on Friday was on the Jackson Hole economic symposium in Wyoming, North America breathed a bit easier as fears of a widespread rail strike in Canada waned.

Nearly 10,000 workers from Canadian National Railways (NYSE:CNI) (CN) (Montral, Quebec) and Canadian Pacific Kansas City (NYSE:CP) (CPKC) (Calgary, Alberta) threatened to walk off the job by Thursday without a last-minute agreement with the Teamsters labor union.

The Teamsters opposed plans from CN to relocate its workers cross-country to fill any prospective labor shortages in the future, while the issue with CPKC is focused on safety.

Late Thursday, CN said it ended its lockout and was initiating a recovery plan.

"While CN is satisfied that this labor conflict has ended and that it can get back to its role of powering the economy, the company is disappointed that a negotiated deal could not be achieved at the bargaining table despite its best efforts," it said in a statement.

The Associated Press issued breaking news Friday that Teamsters Canada Rail Conference filed notice of further labor action after the federal government intervened.

CPKC, for its part, said it was waiting for instructions from the Canadian labor board. Labor Minister Steven MacKinnon was quoted by the Reuters news service as saying earlier that negotiators had ample time to settle their differences.

"We gave negotiations every possible opportunity to succeed ... but we have an impasse here," he said of the federal action.

From the left-leaning New Democratic Party, federal intervention was an example of bowing to corporate interests, however.

"(Prime Minister) Justin Trudeau has just sent a message to CN, CPKC and all big corporations--being a bad boss pays off," said party leader Jagmeet Singh.

The oil-rich government of Alberta had expressed grave concern over the potential for rail strikes, saying a protracted labor conflict would undermine Canada's reputation as a global trading partner.

With some bottlenecks emerging last week, Alberta said it already witnessed an impact on nearly US$1 billion worth of goods. About half of the Canadian exports move by rail, the provincial government added.

Total intermodal volume was up 6% from first quarter 2023 levels, though those levels were skewed by labor action at the nation's western ports last year. The Railway Association of Canada (RAC) showed fuel and chemical volumes were up 4% year-on-year, though agriculture was sharply lower.

The Canadian rail network carried around 95,500 barrels per day (BBL/d) in crude oil during the first quarter, compared with 214,500 BBL/d during the same period in 2019, before the outbreak of the COVID-19 pandemic in North America.

Broader markets were largely muted, though stocks on the Toronto exchange were down relative to trading on Wall Street. Traders were focused Friday on word from U.S. Federal Reserve Chairman Jerome Powell on how aggressive economic policy makers will be on lowering lending rates.

Western Canadian Select, a benchmark for the price of oil, was moving close to parallel with the international benchmark Brent by trading up some 1.7% in early Friday trading. A slowdown in the Chinese economy, however, has left crude oil prices in the red for the week.

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