Nearly 10,000 Canadian rail workers are locked out amid a stalemate in contract negotiations with two major railroads that has halted rail shipments within the country's borders. U.S. ag shippers and railroads worry disruptions to cross-border traffic will have far-reaching effects.
Canadian National and Canadian Pacific Kansas City at 12 a.m. this morning announced they were locking out employees with membership in the Teamsters Canada Rail Conference amid disputes over rest periods, scheduling and employee relocation. Only employees within Canada are affected; U.S. workers operate under a different agreements with the two railways.
The companies had already embargoed movements of certain hazardous chemicals within Canada earlier this week, according to notices in the Association of American Railroads’ embargo system.
While the lockout only applies to Canadian lines, its impact stretches past the nation’s borders. Union Pacific CEO Jim Vena on Monday warned Canadian Labor Minister Steve McKinnon in a letter that a shutdown would “directly impact cross-border traffic, causing a significant ripple effect in the U.S.” More than 2,500 Union Pacific cars per day, he said, would not move across the border if one were to occur.
If an agreement is not met and the shutdown were to linger, it would have “devastating consequences on the North American economy," he added.
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"Along with supply chain delays and shortages, mines, grain elevators, factories, mills and other industries will incur increased costs when they lose their rail service,” Vena wrote. "They will be forced to shut down or find costly, last-minute temporary alternatives – and in many cases, there are no alternatives to rail.”
The shutdown will hinder the transport of agricultural exports being shipped out of Canadian ports, said Soy Transportation Coalition Executive Director Mike Steenhoek. It would also interfere with a “substantial volume” of fertilizer imports that originate in Canada, he added.
"The U.S. and Canada have prided ourselves on having the most seamless and economically dynamic border between two countries in the world,” Steenhoek said. "That reputation will erode if a prolonged strike or lockout is permitted."
The fallout in fertilizer markets will depend on how long the shutdown lasts, Josh Linville, an analyst at financial services firm StoneX, said in an email. A couple days to a week shouldn't have a "huge" impact, but if it lasts longer values may rise within North America as the market attempts to establish new routes, he said.
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