Why a Canadian freight rail halt would roil North American provide chains

22 August 2024

3 minute learn

Canada’s two fundamental freight rail firms are set to lock out round 10,000 of their Canadian unionized employees on Thursday at 12:01 a.m. ET (4:01 GMT), beginning an unprecedented simultaneous work stoppage that will grind nearly all railway freight motion within the nation to a halt, reported Reuters. 

How built-in are the rail networks throughout North America?

Canadian Nationwide Railway Co. and Canadian Pacific Kansas Metropolis CP.TO have stated their rail networks south of the border will proceed to function, however business teams concern {that a} work stoppage would have far-reaching results on the motion of products and commodities throughout North America. 

CN and CPKC’s coast-to-coast rail networks in Canada join south of the border and function vital provide chain hyperlinks to commerce corridors and ports throughout North America.

The networks intersect with these of U.S. rail operators akin to BNSF Railway, Union Pacific, Norfolk Southern and CSX, facilitating the motion of billions of {dollars}’ value of products and commodities by way of ports and warehouses throughout the continent.

CN’s community stretches south to New Orleans. CPKC’s community hyperlinks to the U.S. ports of Corpus Christi, New Orleans and Gulfport, and it extends additional south to the ports of Tampico and Lázaro Cárdenas on the east and west coasts of Mexico.

How would a Canadian rail stoppage have an effect on the USA?

Round a 3rd of the site visitors moved by the 2 Canadian rail firms crosses the border with the USA.

Many US firms and producers, particularly these within the Midwest, use Canadian ports for imports and exports, as Montreal could be quicker for shipments to and from Europe, whereas Vancouver could be quicker for ocean service to and from Asia.

Union Pacific, the No. 2 US railroad operator, has warned {that a} simultaneous stoppage would have devastating penalties for the US and Canadian economies.

Dozens of teams representing miners, farmers, exporters, and fertilizer producers, amongst others, have warned that their sectors face crippling supply-chain delays, elevated prices, cash-flow constraints and potential shutdowns in a protracted stoppage.

How would the US and Canadian farm sectors be affected?

A stoppage would hit the motion of all the pieces from wheat to ethanol, potash fertilizer and meat.

Specifically, it could crimp shipments of US spring wheat from Minnesota, North Dakota and South Dakota to the Pacific Northwest for export. A stoppage would additionally hit Canadian potash and grain exports.

The US exported $28.3 billion of agricultural merchandise to Canada in 2023, making it the third-largest vacation spot for US agricultural exports behind China and Mexico. The US imported $40.1 billion of Canadian agricultural merchandise final 12 months, making Canada the second-largest originator of US agricultural imports.

Ethanol, potash, corn, cereals, meals grains, cooking oils, and meat are among the many agricultural merchandise traded between the 2 nations.

Will commerce with Mexico be affected too?

Mexico is Canada’s third-largest single-country merchandise buying and selling companion behind the US and China, whereas Canada was Mexico’s fourth-largest merchandise buying and selling companion in 2023.

Mexico exports vehicles, vehicles and car components to Canada, together with mangoes and avocados. Canada exports wheat, meat, aluminum, vehicles and components to Mexico.

Two-way commerce between the 2 international locations, a lot of which strikes by way of the rails, was practically C$55 billion ($40.48 billion) in 2023.

Can the trucking business step into the breach?

Truckers say they’re dealing with a surge in demand and that street freight charges are rising for shippers in Canada. Nonetheless, business insiders say that whereas the trucking sector can deal with among the demand, it can’t change rail distribution. In some circumstances, the business doesn’t have the tools, nor the capability, to deal with bulk commodity cargoes akin to potash, meals grains, or coal.

($1 = 1.3587 Canadian {dollars})