On May 1, the Teamsters Canada union voted in favor of a strike at Canada’s two major cargo rail networks, Canada National (CN) and Canadian Pacific Kansas City (CPKC), with over 95% of members voting in favor of a strike. The vote triggered a mandatory 21-day reconciliation period, during which negotiations could resume. If no agreement is reached, conductors and engineers could launch a nationwide rail strike.
On May 9, Federal Labour Minister Seamus O’Regan requested that the Canada Industrial Relations Board investigate the potential safety implications of the strike. The strike will not be allowed to move forward until the Board’s decision has been published, for which the timeline has not been specified. However, O’Regan indicated he does not support using back-to-work legislation to end the strike, which could force labor unions to end strike action or impose a settlement. If the strike moves forward, the Teamsters will be required to issue a 72-hour strike notice.
The union’s contract expired at the end of December 2023, but despite nearly six months of ongoing negotiations, both sides have indicated they are far from a deal. The Teamsters have raised safety concerns regarding the companies’ move to remove provisions for mandatory rest periods, while CN and CPKC have objected to the Teamsters’ unwillingness to adopt a more modern contract agreement with hourly pay rates.
Companies should expect widespread disruptions to rail and ocean shipping across many industries, as well as potential production stoppages due to increased cargo backlog. The two rail lines combined support over 90% of Canada’s railroad traffic and provide crucial support for the transportation of key goods including agriculture, vehicles, fertilizers, petrochemicals, minerals, wood products, and consumer goods.
Port congestion likely as strike hinders intermodal transport
In addition to more imminent rail disruptions, CN and CPKC support intermodal cargo services at all Canadian containerized marine terminals, which could exacerbate port congestion throughout the country. Affected ports include the Ports of Vancouver, Prince Rupert, Montreal, and Halifax. In particular, the Ports of Vancouver and Montreal could see heightened congestion, as rail operators are currently working through a backlog of containers at the port and may be forced to halt progress during a strike. Ahead of potential disruptions, major container shipper Maersk has announced contingency plans for the strike, including offering inducement calls at the Port of Seattle-Tacoma for cargo destined for the United States. The carrier will also divert some cargo from the Port of Vancouver to the Port of Prince Rupert to spread cargo backlog more evenly between the ports, although rail transport at Prince Rupert will also be halted.
Agricultural and fertilizer industries prepare for disruption
Canada’s agriculture sector is one of the most dependent industries on rail transportation, with the country’s major wheat and canola seed industries most at risk. Rail transports 94% of all Canadian grain, and no competitive alternatives to shipping exist given Canada’s vast geography. Even if the strike is unexpectedly averted, grain farmers in Canada are expected to slow sales weeks in advance of a potential strike as producers seek to minimize port congestion fees and contract penalties.
Additionally, lack of transportation could lead to congestion and limited capacity at grain storage facilities, limiting the amount of product that can ultimately be sold. Canada is the world’s largest canola producer and the third-largest wheat exporter.
Severe disruptions to the fertilizer and potash industries should also be expected, which could further hinder agricultural production. Canada is the world’s third-largest fertilizer producer, accounting for about 12% of the global supply, and the largest producer of potash, a key input for many fertilizers. Canada’s fertilizer and potash exports are almost completely dependent on rail transport, with approximately 75% of fertilizers transported by rail. Additionally, most potash mines rely on immediate access to rail transportation and only have storage space for 5-7 days of product before being forced to halt production, and once the situation improves, production is likely to take several days to restart.
Disruptions to fertilizer supplies should be expected if the rail strike moves forward. Many Canadian fertilizer exports to the United States are transported by rail and are liable to stoppages.
Strike could impact automotive and petrochemicals industry cargo across North America
Automotive industry advocates have raised concerns about severe potential impacts if the strike moves forward. CN and CPKC provide key transportation links for finished automotive vehicles in Canada and transport of imported automotive components from Asia, particularly since CPKC is the only rail network that serves Canada, the United States, and Mexico.
Strike action could lead automotive plants in Canada to completely halt production amid component shortages and lack of transportation of vehicles from the plants. Plants in the United States that source imported components via Canada or export vehicles to Canada could also be affected.
Canada is also a growing player in the electric vehicle battery supply chain, with Canada’s mining and smelting industries producing the raw material components nickel, cobalt, graphite, and aluminum. Transport of these components to automotive facilities across North America could be affected by a strike.
Canada’s petrochemicals sector is also highly reliant on rail transport and likely to be severely affected. Petrochemicals make up the second-highest market share for CPKC and the third-highest market share for CN.
Everstream clients are receiving more detailed insights and recommendations about this risk.
Contact us for a personalized demo showing how to get a complete view of the risks affecting your end-to-end supply chain and what you can do to mitigate them.