Canada braces for $730 million-a-day freight freeze as union talks stall: ‘The clock is ticking’

The impact will be widespread because so many companies rely on Canadian National and CPKC railroads to deliver their raw materials and finished products. Railroads carry more than $1 billion Canadian (US$730 million) worth of goods each day and delivered more than 375 million tons of freight last year.

More than 32,000 commuters will also be affected in Toronto, Montreal and Vancouver because they rely on CPKC dispatchers to direct those trains over that freight railroad’s tracks.

Government officials are playing a more active role in trying to resolve the dispute, with the labor minister meeting with the parties at the CN negotiations in Montreal on Tuesday and with CPKC contract negotiators on Wednesday in Calgary. But so far, Prime Minister Justin Trudeau has been reluctant to force the Teamsters Canada Rail Conference union to accept a deal. Many business groups have urged the government to intervene and force arbitration.

Both railroads are offering raises to what are already well-paying jobs that they say are consistent with other recent deals in the industry. The negotiations are primarily hung up on issues related to the way rail workers are scheduled and concerns about rules designed to prevent fatigue. At CN, there are some additional concerns about provisions that would help the railroad temporarily relocate workers when it is short in other regions.

Nearly 10,000 workers are covered by these contracts. CN said its engineers make about $150,000 a year while conductors earn about $120,000, and CPKC says its pay is comparable.

Two years ago, quality-of-life concerns about demanding schedules and the lack of paid sick time drove U.S. railroads to the brink of a strike before Congress and President Joe Biden intervened and forced the unions to accept a deal.

Businesses in Canada are especially concerned because CN and CPKC are slated to shut down simultaneously Thursday at 12:01 a.m. EDT. Past labor disputes have sometimes stopped the trains at just one of the railroads for a brief period — most recently in March 2022 at CPKC — but not both at the same time.

“Nobody can go very long without a constant source of supply, and a lot of commodities are shipped by rail,” said Dan Kelly, president of The Canadian Federation of Independent Business.

Losing rail shipments would be especially painful for companies that rely on bulk shipments over long distances because there is no way for trucks to make up the difference. Chemical manufacturers, refineries and exporters of grain and fertilizer are especially dependent on rail. And many consumer goods travel by rail once they are unloaded off massive ships.

All rail traffic in Canada and any rail freight that goes into or out of the United States will stop moving if a lockout or strike occur, but the railroads’ numerous trains within the United States and Mexico will continue operating.

A few examples of the potential impact:

Chemical manufacturers could take first hit

The railroads stopped accepting new shipments of hazardous materials to ensure that none of those dangerous commodities would be stranded along the tracks if the railroads shut down. Shipments of perishable goods were also put on hold early. All other shipments are being gradually halted before Thursday.

Depending on how many supplies they have on hand and how much storage space they have for finished products, some chemical plants may have to quickly start cutting production or even consider shutting down.

One key example is chlorine that is used to treat drinking water across Canada, all of which is shipped by rail, according to Greg Moffatt, executive vice president of the Chemistry Industry Association of Canada. Most water treatment plants have a 10-to-14-day supply of chlorine on hand.

“The clock is ticking,” Moffatt said. “And there is no ability to move chlorine by truck.”

Even for chemicals that can be hauled by truck, it’s not practical. It would take at least three trucks to haul the same amount one rail tank car carries.

Potential grief for grain

Grain, fertilizer and most other bulk products such as timber, construction materials and coal all move by rail. Western Grain Elevators Association executive director Wade Sobkowich said the contract dispute is happening at a time when demand for Canadian grain is at its highest: About $50 million of grain moves every day.

“This isn’t just grain. This is forest products, this is automotive, this is coal, mine products. … It’s going to have a huge impact to consumers in Canada and our customers around the world that need food ingredients,” he said.

Problems at the shipping ports

Ports rely on railroads to haul containers filled with all kinds of goods across the country after they are unloaded from massive ships.

Trains haul about 60% of the cargo containers that come into the port, according to Port of Halifax spokesperson Lori MacLean.

“Canadian gateways have already seen a reduction of volumes due to the uncertainty around rail operations,” she said.

The Vancouver Fraser Port Authority has told ships that are currently en route to slow down and delay their arrival time to prevent further congestion in the port.

International shipping giant Maersk is making contingency plans but continues to ship goods into Canadian ports for now.

There really isn’t any alternative to rail when it comes to moving large goods across North America, says Dennis Darby, president of Canadian Manufacturers and Exporters, the country’s largest trade and industry association.

If the railroads shut down, the problems will reverberate throughout Canada and the U.S., Darby said.

“We are all a part of the same supply chain,” he said.

The politics are problematic

Trudeau is likely waiting to intervene until it looks like there is no other alternative because his Liberal Party doesn’t want to “alienate the labor movement,” said Daniel Béland, a political science professor at McGill University in Montreal.

“The politics are tough indeed … Yet, as they recognize, the ongoing strike has a detrimental impact on the country as a whole,” he said.

Negotiations are difficult

Both Canadian National and CPKC had proposed shifting away from a longstanding system in which train crews are paid based on the miles they travel, to a system based on the hours they work. The railroads said that would make it easier to give workers more predictable schedules.

But the union resisted. It believes the change will erode schedule provisions designed to reduce fatigue that they have fought so hard for over the years.

“We don’t want to go backward and give concessions to very, very profitable companies that should be improving conditions,” union spokesman Christopher Monette said.

In hopes of reaching a deal, CPKC dropped its proposal to use an hour-based pay system like that used in the United States, said railroad spokesperson Patrick Waldron.

But a remaining sticking point is how much train crews should be paid when they are resting at a hotel on the road between trips.

The railroads say they are making sure these new contracts reflect the latest Canadian rules, which require additional rest between trips.