Domestic and cross-border freight markets remain in limbo as the threat of a Canadian rail workers strike looms large over North America. Read on to learn more about the state of negotiations and how a strike might impact supply chains on both sides of the border.   

Read also: Canada Freight Market Update

Heading: Get Up to Speed 

Before discussing the potential impact of a strike, here’s a rundown of what’s transpired thus far: 

• Negotiations between the Teamsters Canada Rail Conference (TCRC) and rail operators Canadian National Railway (CN) and the Canadian Pacific Kansas City (CPKC) began after their collective agreement expired on December 31, 2023.
   
• In early May, more than 9,000 union employees voted to strike as soon as possible if the sides could not reach a deal.
   
• The strike was called off when concerns from industry groups prompted Canadian labor minister Seamus O’Regan to ask the Canadian Industrial Relations Board (CIRB) to assess whether the strike would threaten national safety due to the disruption of critical shipments.  

• The CIRB is now reviewing any “maintenance of activities” agreements between the two sides, as these indicate which services must be maintained by both parties in case of a work stoppage; the TCRC has said no such agreements exist.
   
• Though negotiations can continue, the TCRC cannot strike until the CIRB decides on the legality of such an action. 

• The TCRC believes rail operators would prefer to await arbitration rather than continue negotiations, so little progress has been made between the two sides in recent weeks. 

• The TCRC has also implied it will strike as soon as the CIRB concludes its review, but given the typically lengthy nature of the process, the CPKC says that a strike or lockout in the next 60 days is unlikely. 

Heading: The Potential Fallout of a Failed Deal 

Canadian National Railway and Canadian Pacific Kansas City own about 75% of all Canadian rail capacity, so the impact of a strike could be devastating. First and foremost, it would likely limit the flow of certain goods and increase over-the-road truckload transportation demand. Freight from Canadian ports could also land on U.S. soil, leading to capacity crunches stateside.

A single strike day will also create at least another three to four days of disruption. This exponential effect could have a significant downstream impact on U.S. automakers, which rely heavily on inbound shipments from Canada that would almost certainly see significant slowdowns should the railways close. Further, Canadian grain, potash and coal producers have commented anecdotally that the strike could disrupt their export operations.  

Jason Miller of Michigan State University recently completed a carload volume data analysis that revealed general containerized goods, metallic ores, chemicals, coal, grains and other petroleum products are the most heavily transported commodities. CN and CPKV account for 74% of the total carloads of metallic ores shipped, putting this freight type at a significant risk of disruption. 

Ultimately, all of the above could lead to higher prices for consumers and businesses, put jobs at risk, and threaten Canada’s reputation as a reliable trading partner. 

Heading: The Good News 

While stakeholders anxiously await a decision from the CIRB, rail customers are creating contingency plans without any certainty as to when or even if they will need to use them.  

However, the latest OTRI data, which acts as a relative measure of truckload supply in the marketplace, does not indicate any signs of impacts on shipper routing guides out of Canada. This is likely because both the Canadian and U.S. capacity markets are oversupplied to the point that they could more easily absorb the railway volume. Still, rate increases would likely follow if the shutdown lasts long enough to drive sustained long-haul capacity demand. 

Tender rejection rates show no signs of tightening truckload capacity with a pending rail strike.  

Heading: Hope For The Best, Prepare For Anything 

The potential for significant disruption persists as negotiations remain at an impasse and the CIRB continues its assessment. Stakeholders across various industries must stay vigilant and prepared for any developments, with contingency plans in place to mitigate potential operational impacts. Though it is too soon to discern how the situation will play out, we hope the two sides can reach a deal in time to prevent the stoppage of this critical cog in the Canadian economy. 

Author bio

David is the Vice President of Market Intelligence at Arrive Logstics. David joined the team in 2017 after six years at AFN focused on business intelligence. He leads Arrive’s Market Intelligence team focused on providing critical market data and expert analysis to internal teams, while also driving Arrive Insights, Arrive’s external market update for shippers and carriers.