Rail Strike Threatens to Hobble Canadian Economy

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Labor action from the national railways could undermine Canada's reputation as a trading partner and bruise the broader economy, Alberta's trade minister said.

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

"Unless there is an immediate and definite resolution to the labor conflict, CN will have no choice but to continue the phased and progressive shutdown of its network which would culminate in a lockout," the company said on Sunday.

The Teamsters oppose 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.

A full stop could be crippling given that the Canadian rail network carries everything from beans to timber and crude to other North American markets. Matt Jones, the trade minister for Alberta, said a strike could have a dramatic impact on the Canadian economy.

"The disruption to Class 1 railways would have far-reaching impacts, especially considering Canada Industrial Relation Board's ruling that CPKC and CN would not be required to maintain some services during a work stoppage," he said during the weekend. "This will disrupt supply chains, reduce hours and wages for workers across Canada and drastically impact the Canadian economy."

This is the second time this year that rail workers threatened to strike.

The Canadian railways have handled about half of the country's exports, though those volumes could change this year due to new export arteries for oil and natural gas on the nation's west coast.

Parts of the industry are in decline, however. Federal data show 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.

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.

"Agriculture was down as the 2023 grain crop came in about 10% smaller than the 2022 crop and hence there was less demand to ship grain compared to the previous year; while production problems at several mines negatively impacted coal volumes," the association said.

Among a handful of concerns, from geopolitical issues to commodity prices, the RAC listed the potential for labor disruptions as a possible headwind for the industry this year.

Following a considerable lag period at the end of 2023, the Canadian economy is growing at a rate of between 1.2% and 1.8% per quarter, similar to the growth rate in the United States.

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