U.S Supply Chain Threatened By Canadian Rail Strike

U.S Supply Chain Threatened By Canadian Rail Strike

The Canadian trucking industry is sounding the alarm, warning it may not be able to meet demand for essential goods if a work stoppage hits the country’s major railroads. Dave Earl, President and CEO of the British Columbia Trucking Association, stated that trucking cannot fill the gap left by a rail labor disruption, which is becoming increasingly likely as labor disputes intensify.

Rail Labor Dispute Reaches a Critical Point

The Teamsters Canada Rail Conference has issued a 72-hour strike notice to Canadian Pacific Kansas City (CPKC), with 3,300 union workers set to strike at 12:01 a.m. ET on Thursday, August 22, unless a new labor agreement is reached. In response, both CPKC and Canadian National Railway (CN) plan to lock out a combined 9,300 workers on the same day.

Limited Capacity in Canada’s Trucking Industry

These notices are required by Canadian law, and the union’s strike notice is a response to CPKC’s planned lockout and changes to collective agreements. However, the trucking industry is warning that it lacks the capacity to fully absorb freight that would typically move by rail, highlighting the critical role railways play in Canada’s supply chain.

Freight Embargoes and Early Disruptions

Canada’s railways move over 900,000 metric tons of goods daily. A work stoppage would have widespread impacts, with some freight already being diverted to trucking and other modes. However, the industry is concerned it may be overwhelmed by the sudden surge, especially for cross-border shipments to the U.S.

Impact on U.S. Freight

  • Increased Demand for Trucks: Freight typically moved by rail could shift to trucks, straining capacity and driving up demand for cross-border transportation.
  • Potential Rate Increases and Market Adjustments: Spot rates may rise as truckload capacity tightens, helping balance an oversupplied market but creating cost pressures for shippers.
  • Delays for Key Industries: Industries reliant on just-in-time deliveries, like timber, grain, and auto parts, could face production delays, impacting North American supply chains.

Urgency for Resolution

Both CPKC and CN have begun freight embargoes in preparation for the work stoppage. Talks between the Teamsters and rail carriers have stalled since the last contract expired, with the union rejecting binding arbitration. Canadian Labour Minister Steven MacKinnon has urged both parties to reach a deal and offered mediation.

With the deadline looming, the potential disruption to both Canadian and U.S. freight underscores the need for a swift resolution to avoid widespread supply chain impacts.