Industry raises alarm over strike as feds urge CN and union to keep talking
With no solutions to turn to, big manufacturers who trade from east to west are affected, says the head of Manufacturers and Exporters of Quebec
Exporting & Importing
Risk & Compliance
MONTREAL – A strike by roughly 3,200 Canadian National Railway Co. employees over working conditions is prompting warnings from the railroad’s clients that the work stoppage could trigger layoffs and closures in their industries.
The Teamsters Canada Rail Conference announced the strike Monday night after the two parties failed to reach a deal by the midnight deadline.
Conductors, trainpersons and yard workers took to the picket lines Tuesday, halting freight trains across the country after CN confirmed last week it was cutting jobs as it deals with a weakening North American economy that has eroded demand.
The work stoppage triggered worries among grain elevator operators and farmers – more than 90% of grain is moved by rail – about lost sales and contract penalties.
“When you lose a day of shipping you never recover it,” said Wade Sobkowich, head of the Western Grain Elevator Association.
“There’s really nothing that can be done. Once they’re not moving trains, you’re basically shut down without any alternatives until the issue is resolved.”
The oil industry expressed concerns over the closure of a key export artery, “particularly in light of the current shortage of available pipeline capacity relative to oil production in Western Canada,” said Ben Brunnen, a vice-president at the Canadian Association of Petroleum Producers.
The work stoppage will have a “seriously harmful effect” on other resource industries, said Mining Association of Canada chief executive Pierre Gratton.
“This strike will result in a severe reduction or elimination of railway capacity and will trigger the closure of mines with concurrent lay-offs of thousands of employees beginning in a matter of days,” he said in a statement.
Gratton called on the government to impose binding arbitration, adding that Ottawa should consider the step as a requirement in future labour disputes involving large railroads.
The impact will depend largely on whether the strike drags out over a matter of weeks, said Veronique Proulx, head of the Manufacturers and Exporters of Quebec.
“The big manufacturers who trade from east to west are very affected,” she said. “They have no other solutions to turn to. As we know, road transport is congested, so what are the alternatives?
“We are talking about large volumes, so large amounts of money are involved,” Proulx said.
On Tuesday the federal government urged CN Rail and the Teamsters Canada Rail Conference to continue negotiating.
Labour Minister Patty Hajdu said Tuesday the government is concerned about the impact of a work stoppage on Canadians, but remains hopeful the two sides will reach an agreement.
CN Rail said it would return to the bargaining table Tuesday with the assistance of federal mediators. “We are disappointed that the TRCR has initiated strike action,” spokesman Jonathan Abecassis said in an email.
Union spokesman Christopher Monette said they hope to end the labour dispute as soon as possible.
Passenger rail services in the country’s three biggest cities would not be affected by the strike, the union said.
Neither will Canadian consumers in the lead-up to the holiday season, said Jim Rice, deputy director at the Massachusetts Institute of Technology’s Center for Transportation and Logistics.
“Most of the inventory is likely on the shelf or at the distribution centre to go to the shelf, and probably not on rail cars,” Rice said, citing quick turnover for items from clothing to electronics.
Now 100 years old, CN touts some 22,000 kilometres of track stretching from Vancouver to Halifax to the U.S. Gulf Coast. The railroad operator is an essential channel for bulk transport and container imports and exports, generating more than $11.33 billion in revenue as of Sept. 30, double that of competitor Canadian Pacific Railway Ltd.
The railway workers, who have been without a contract since July 23, have said they’re concerned about long hours, fatigue and what they consider dangerous working conditions.
Janet Drysdale, CN’s vice-president of financial planning, said at a Toronto investor conference Tuesday the layoffs were aimed at “aligning the overall labour expense to the reality of what we’re seeing on the demand side.”
Shipping volumes are down 11% so far quarter to date, “which is significant,” she said, adding that CN is not anticipating a recession next year “but more of a soft landing.”
Alberta energy and agriculture ministers asked Prime Minister Justin Trudeau to recall Parliament ahead of its scheduled return on Dec. 5 and enact emergency back-to-work legislation.
“Any disruption in shipments would have serious consequences for an economy that is already dealing with severe bottlenecks due to cancelled and delayed pipelines,” Energy Minister Sonya Savage said in a release.
“We have seen the severe consequences of rail backlogs before. Farmers don’t need the added pain from compounding rail delays, especially after this difficult harvest. Now is the time to act,” said Agriculture Minister Devin Dreeshen.
CN delivers up to 5,650 hopper cars per week to Canadian elevators, amounting to more than a half-million tonnes of grain, according to the Alberta Wheat and Barley Commissions.
“If those cars are not supplied, farmers can’t deliver and are not paid. Even a disruption of a few days will cause a massive backlog and economic losses that are ultimately borne by farmers,” the commissions said in a statement.
“There are a lot of farmers who already have a significant amount of their income trapped under snow,” added wheat commission chair Gary Stanford.
A delayed grain crop has caused headaches for the industry following a dry spring and wet summer. Though the yield was big, some of it remains in the field, increasing pressure on the rail system.
Recent wet Prairie weather has produced a crop with more mildew, sprout damage and frost, which will fetch lower prices and affect all players along the supply chain, said Wade Sobkowich of the grain elevator association.
Canola exports have also slumped following China’s ban on Canadian canola.
The threat of a strike has already had an impact, as grain companies and foreign importers cut back on orders to avoid paying contract extension fees, demurrage charges “or, God forbid, defaulting on a contract,” Sobkowich said.
CN services about half the elevators in Western Canada, on top of exclusive access to the grain terminal on Vancouver’s North Shore and the port in Prince Rupert, B.C.
“This strike comes at a terrible time for agriculture,” said Jeff Nielsen, head of the Grain Growers of Canada.