Rail disputes in Canada could threaten North American supply chains

Labor disputes on Canadian railways may lead to disruptions in cross-border rail freight between the United States and Canada, raising concerns.

On August 18, the Associated Press reported that labor disputes on Canadian railways continue to escalate. Workers from Canada's two major railway companies, Canadian National Railway and Canadian Pacific Kansas City Railway (CPKC), may go on strike on the 22nd. This situation may lead to partial disruptions in cross-border rail freight between the United States and Canada, and then affect North American supply chains. Reuters even called it a "catastrophe."

According to the Canadian Press, due to the deadlock in negotiations with railway workers' unions, Canadian National Railway and CPKC have suspended some cargo transportation. Canadian National Railway notified last week that if a labor agreement cannot be reached in time, more bulk commodity transportation may be interrupted. CPKC said earlier this month that it will temporarily suspend the transportation of dangerous goods. Last week, it has interrupted the transportation of all "inhalation hazard" toxic and hazardous substances on its North American railway network. If the labor and management sides cannot reach an agreement, 9,300 employees of the two companies will stop work on the 22nd.

These two Canadian railway companies have extensive layouts in the United States. CPKC's railway lines also connect to Mexico. They handle up to 40,000 railcars of freight per day with a value of about $1 billion. Once Canadian rail freight comes to a halt, cross-border trade logistics between the United States and Canada will be severely impacted. Sectors such as complete vehicles and auto parts, chemicals, and agricultural and forestry products will be seriously affected. As the agricultural harvest season approaches, the impact on agriculture will be even more severe.

The "Supply Chain Deep Dive Network" has been tracking labor disputes on Canadian railways and is not optimistic about the negotiation prospects. It also disclosed that people in the logistics and transportation industry have been formulating contingency plans for disruptions in US-Canadian rail freight since May. The negotiations between the two companies are taking place simultaneously this time. In the past, if transportation of one company was affected, it could be transferred to the railway network of another company, but not this time. Materials arriving at Canadian ports mainly rely on the Canadian railway network for transfer. Railways are an important link in logistics. Once operations are suspended, it will take weeks to resume. Rail freight disruptions can be diverted by truck or transferred to other ports, but the capacity of a freight train requires 300 trucks to replace, and the cost of road transportation is higher than that of railways. The Associated Press quoted industry insiders as ***yzing that although roads can share some of the logistics pressure, completely replacing railways is not realistic.