The Canadian rail shutdown is expected to increase trucking rates and leave billions of dollars in container trade to the US in limbo. The two North American neighbors are highly dependent on fluid trade, but with 9,000 rail union workers locked out, consumer goods, intermediate parts, fertilizer, cement, coal, timber, cars, and more remain at a standstill.
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Roughly $572 million in container trade flows into the US from Canada daily. Customers will likely turn to more pricey alternatives, such as traditional road trucking, to ameliorate the situation as the days mount. After months of failed negotiations, Canadian Pacific Kansas City and Canadian National Railway locked out the freight rail workers who are represented by the Teamsters of Canada union.
The timing could not have been worse, with back-to-school in full swing and the pending holiday rush. Employees up and down the supply chain depend on the steady movement of goods from Ford, Walmart, Nike, General Motors, Procter & Gamble, and hundreds more. Ocean carriers had announced contingency plans before the lockouts and even declared force majeure, the legal power to refuse contractual agreements as the result of situations beyond their control.
Canada ranks number 1 for US chemical exports, and the US imports approximately $24.3 billion annually from its northern neighbor. Insiders are confident that a negotiated contract settlement will be reached, or in the worst cases, Canadian government intervention. In the summer of 2023, the ILWU Canada labor union went on strike for close to two weeks. Nearly $380 million in daily trade was affected, and the current situation is expected to be markedly worse.
A looming concern is the time it takes the larger supply chain to return once operations commence. Experts cite three to five days of recovery for every one day of disruption. In this case there are two railways impacted, so some speculate up to six to eight days.
All parties are hoping for a negotiated agreement without governmental intervention. Negotiations had been ongoing for roughly nine months, with the length of rail worker shifts and rest periods as the most contentious sticking points.
