Peter Friedmann, Executive Director, Agriculture Transportation Coalition (AgTC) said the impact of a Canadian railroad stoppage could be: “Very substantial, dramatic and it will impact both U.S. imports and U.S. exports that are dependent on the Canadian National Railway (CNR) and the Canadian Pacific Kansas City Railway (CPKC).”
Both railroads have said that they will lock out their workers on Thursday, August 22nd, if last minute talks with the Teamsters Union fail.
He explained that: “Most Americans have no idea how dependent we are on the Canadian railroads (and) the Canadian ports they serve. Those routes carry massive volumes of agriculture exports origin at U.S. farms and processing facilities. And even more consumer imports from Asia, destined to U.S. stores and distribution facilities. Yes, there are some alternate routes via U.S. ports, and U.S. railroads to get our agriculture and forest products exports, as well as import, through our U.S. ports – but there is only so much capacity on our railroads and at the U.S. marine terminals. Already, well before Canadian rail service/work stoppage actually happens, the congestion is rearing its disruptive and costly head.”
Friedmann is hopeful that any work stoppage will be short-term: “I don’t think it will last very long because it will be too damaging. The Canadian government has the power to intervene if this thing gets out of hand. I don’t think the (Canadian) government can let this situation get out of hand.”
ILA Impasse Looms
Friedmann says the threat of a rail stoppage is happening as contract negotiations with the International Longshoremen's Association (ILA) appears to have reached an impasse with ocean carriers and terminal operators at U.S. East and Gulf Coast ports: “The ILA situation is that there has not been a work stoppage for four decades. We see a precedent for significant wage and benefit increases similar to those won on the West Coast by the International Longshore & Warehouse Union (ILWU). We expect the ocean carriers and the terminals to agree to pay a lot more money so as to avoid a work stoppage on the East and Gulf Coast ports.”
Canadian Railroads Announce Plans to Lockout Workers
On August 18th the Canadian National Railway (CN) said: “it has issued notice to the Teamsters Canada Rail Conference (TCRC) formally advising them of its intention to lockout Canadian TCRC-represented employees on Aug. 22 at 00:01 ET unless an agreement or binding arbitration is achieved before that time.”
Despite negotiations over the weekend, “no meaningful progress has occurred, and the parties remain very far apart. 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. CN must continue with the progressive and planned shutdown of its network, as we remain under the threat of an unpredictable strike notice. This planned shutdown helps to ensure the safety of the communities in which we operate and the safety of our customers’ goods, and to optimize the network’s recovery following a labor disruption.”
On August 19th, Keith Creel, President and Chief Executive Officer, Canadian Pacific Kansas City Railway (CPKC) said: “We do not want a strike or a lockout. We want to renew the collective agreements in a way that is fair to TCRC employees, as well as our other railroaders, including those in the other unions that have negotiated agreements with the company in good faith over many years. We are firmly committed to staying at the bargaining table to reach renewed agreements. We have also offered to resolve this matter through binding interest arbitration should negotiations be unsuccessful. Binding interest arbitration is a fair and reasonable process that would resolve this dispute without inflicting the unnecessary harm and disruption of a work stoppage.”
Creel added: “It is patently false to suggest, as the TCRC leadership did last night, that CPKC has unilaterally changed or canceled the terms of the collective agreement or that the company is making proposals that compromise safety in any way.”
Canadian Teamsters Respond
On August 18th, the Teamsters Canada Rail Conference said they received the 72-hour lockout notice from CN to the effect that unless parties reach last-minute agreements, “a work stoppage will occur at 00:01 on Thursday, August 22.”
“Despite reaping billions in profits over the years, CN is demanding concessions that would drag working conditions back to another era. They don’t care about supply chains, farmers, or small businesses—their sole focus is on padding the pockets of their managers and shareholders, with little regard for the safety or well-being of employees,” said Paul Boucher, President of the Teamsters Canada Rail Conference.
The Teamsters said that “CN is now demanding an extension to work days in provinces west of Ontario, creating a fatigue-related safety risk. CN is also attempting to impose a forced relocation policy, which could see workers forced to move across the country, tearing families apart in the process. By issuing a lockout to obtain these concessions, CN is willing to jeopardize the Canadian economy, and hold supply chains hostage to improve their bottom line. The Teamsters remain committed to negotiating in good faith, and doing everything possible to achieve a fair and equitable agreement with the company. Unfortunately, CN has yet to show the same level of commitment.”
Impact on Fertilizer Supplies
An American Farm Bureau Federation report noted that a Canadian rail stoppage will adversely impact U.S. fertilizer supplies: “Canada is a key source of fertilizer for U.S. farmers. Though the U.S. is the third-largest producer of fertilizer globally, it still relies on imports to fully meet domestic demand. For example, Canada holds potash deposits not found in the U.S. that are vital to produce potassium-based fertilizers. The U.S. Department of Agriculture (USDA) noted that in 2023, from all sources, the U.S. imported 13 million tons of potash, with 85% originating in Canada. Canada is also a primary source of nitrogen-based fertilizer imports. USDA reported, on a nitrogen-equivalent basis, just over 25% of all U.S. nitrogen imports came from Canada in 2023. This corresponded to 3.1 million tons of nitrogen-based fertilizers, including 1.2 million tons of anhydrous ammonia, 510,000 tons of urea and 420,000 tons of urea ammonium nitrate. For perspective, between 2005 and 2020 the U.S. imported between 30% and 59% of its ammonia-based fertilizer use.”
The report went on to note that more than 85% of fertilizer trade between the U.S. and Canada is transported by rail, with the remainder handled by trucking (12%) and waterborne vessels (3%). The vast majority of this trade — over 90% — occurs at border crossings in five states: “North Dakota (90% by rail), Minnesota (100% by rail), Idaho (99% by rail), Michigan (29% by rail) and Montana (29% by rail). In 2023, over $2.1 billion in fertilizer trade occurred across the border crossing in International Falls, Minnesota; $1.3 billion occurred across the border crossing in Pembina, North Dakota; and $839 million occurred across the border crossing in Portal, North Dakota.”
U.S. West Coast Ports Could Benefit
Risk analyst Everstream Analytics told AJOT that shippers and carriers are shifting ocean ships away from Canadian ports and toward U.S. West Coast ports:
- Carriers have started to divert cargo from Canada’s West Coast ports in anticipation of the potential rail stoppage.
- We expect that more container ships will start to divert to alternative ports in the U.S., including Los Angeles-Long Beach, Oakland, and Seattle in the coming days as yard congestion at Canadian ports and, subsequently, rail dwell times increase significantly.
- The number of vessel arrivals at container terminals in the Port of Vancouver has dropped from 73 to 61 for the second week of August, the second lowest number of arrivals throughout 2024.
- Percentagewise, the number of vessel arrivals in Vancouver has fallen by 22 percent since the middle of July.
- About 66% of cargo arriving at the Port of Vancouver is moved by rail to final destinations in Canada or in the U.S. Midwest.
- The most impacted goods shipped via rail would be fertilizer, iron ore, grain, cement, salt, potash, coal, cars, wood/timber as well as containers loaded with consumer goods or intermediate parts.
