The clock is ticking as Canada’s two main rail companies — Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) — remain in a deadlock with the Teamsters union, which represents around 10,000 workers at the two companies.
Unless the parties reach a last minute-agreement, a work stoppage is set to begin Aug. 22.
But impacts have already begun. CPKC says it will halt rail shipments originating in Canada and all shipments originating in the United States destined to Canada, as well as all carload traffic destined to Canada, starting Tuesday.
The Teamsters says the CPKC is pressuring the union for concessions that “would make it even harder for workers to predict when they might be called for work, creating a fatigue-related safety risk.” It says CN is attempting to impose a “forced relocation policy, which could see workers forced to move across the country, tearing families apart in the process.”
CPKC, meanwhile, has called its offer “status quo” and one that complies with regulatory requirements and doesn’t compromise safety. CN says it has made four offers to the Teamsters since January that addressed wages, rest, labour availability and health and safety.
Absent some major movement, the lockout will start Thursday, leading to significant economic disruptions across the country.
In recent days, Alberta provincial officials have released statements that have called on the federal government to address the possible disruptions. On Monday, Matt Jones, Alberta’s minister of jobs, economy and trade, said a rail shutdown would impact “at least $55 million of Alberta exports per day.”
“We could see a shutdown of both of our rail lines, and that, to us, the Alberta government, is unacceptable,” Jones said in an interview with CBC News.
“The collateral damage to Albertans, our businesses, Canadians, our reputation as a country that can supply the world with energy and food, will be irreparably harmed.”
So what would the implications of a simultaneous shutdown of these two rail companies be for Alberta’s economy?
Jobs and goods
There are about 30,000 jobs in Alberta that are directly or indirectly tied to the railways, according to Adam Legge, president of the Business Council of Alberta.
“Think of the thousands of businesses across the country that require and rely on consistent, reliable rail shipping to stock their shelves and be able to sell their goods and their wares,” Legge said to CBC Calgary News at 6 host Rob Brown last week.
Canadian National Railway has formally notified the Teamsters union that it would start locking out union workers early on Thursday, following a similar move by Canadian Pacific Kansas City.
Alberta transported $20 billion in goods via rail in 2023. That’s higher than the $17.9 billion it transported via water, $15.4 billion via road, and $2.1 billion via air.
The economic impacts of such a disruption to the supply chain would compound the affordability crisis already affecting the country, Legge said.
“This is no small matter in terms of what the economic implications would be, and it would be devastating for hundreds of thousands of Canadian workers,” he said.
Agriculture
Legge said Canadian farmers would be among the hardest hit by a prolonged railway stoppage.
Approximately 95 per cent of grain is transported by rail.
Stephen Vandervalk farms near Fort Macleod, Alta., and is the vice-president of the Wheat Growers Association.
He called the situation “completely out of control” and urged the parties involved to come up with an agreement.
“They can’t stop. Harvest is right now. We’re combining. Bids are dropping daily because elevators don’t want grain, and they’re stopping deliveries from grain,” Vandervalk said.
“They’re saying, ‘No, please don’t deliver grain because we can’t ship it.’ So [our] cash flow is dropping. We’ve already seen a huge drop of commodities. This is … I don’t know what to say anymore.”
Wheat production in Alberta was around $3 billion last year, according to Shannon Sereda, director of government relations, policy and markets for Alberta Grains.
“We’re using rail to get not only our commodities to international markets, but we’re also using it to get to domestic agri-food processors, such as wheat miller, barley maltsters,” she said.
“Not only [are] there potential impacts to domestic food production, there’s also going to just be general disruptions within the supply chain that I think will reverberate across all industries.”
Oil and gas
For oil exports to the United States, however, the impact will be less significant, largely owing to oil pipeline capacity.
On Monday, Reuters reported that U.S. rail imports of Canadian crude averaged around 55,000 barrels per day (bdp) in May, according to U.S. Energy Information Administration data, while the United States imports about 4.2 million bpd, mostly by pipeline.
“Anybody receiving crude by rail right now is figuring out what alternatives they have, whether it’s an alternative grade that can be substituted on the pipeline, or if a buyer is willing to take something else,” Elliot Apland at MarbleRock Advisors told Reuters.
The completion of the Trans Mountain pipeline’s expansion in May, along with other available capacity, should limit deep discounting, industry experts and analysts told Reuters.
Supply chain
Rajbir Bhatti, associate professor of supply chain management at the Bissett School of Business at Calgary’s Mount Royal University, called the looming situation the “mother of all shutdowns.”
He noted that all sectors are closely intertwined, meaning that if one takes a hit, others will also face recessionary effects.
“Supply and demand economics tell us shortages means prices will go up, and longer wait times for products, but consumers don’t see those things happening immediately on the shelves,” Bhatti said.
“Let’s say you are planning for the crop for the next season, and now the previous crop cannot reach the port … domino effects will kick in.”
Eventually, the ramification will be felt by industry, who will proceed to transfer it on to the common person, Bhatti said.
“Prices go up, shortages kick in. So it’s not really good for the economy, especially at this time,” he said.