Canadian rail shutdowns strand billions of dollars in U.S. trade | Wilnesh News

Just hours after Canada’s labor minister asked the labor board to review its request for binding arbitration and restart rail operations, CNBC has learned that rail companies and unions have been asked to hold individual management meetings with the labor board.

Canadian Labor Minister Steven MacKinnon told a news conference that he was “confident” that the Canadian Industrial Relations Board (CIRB) would accept his recommendation.

“A negotiated agreement is always the best way forward,” McKinnon said in a statement. “Collective bargaining is the way to reach the strongest, most durable agreement — one that benefits both unions and employers.”

MacKinnon’s office told CNBC that the CIRB will decide whether to move forward with the request.

More than 9,000 freight rail workers, represented by the Canadian Teamsters union, are blocked, stranding billions of dollars worth of cargo in the highly integrated trade relationship between the Canadian and U.S. economies. Canadian National Railway (China) and Canadian Pacific Kansas City (CPKC) After months of failed negotiations.

CNBC has contacted CIRB for comment. MacKinnon’s office told CNBC it could take up to 24 hours for the CIRB to announce a decision.

Shortly after MacKinnon’s comments, both Canadian railways announced plans to restart operations.

CN told CNBC they have ended the shutdown. “While CN is satisfied that this labor conflict has ended and can resume its role in driving the economy, the company is disappointed that an agreement was not reached at the negotiating table, despite its best efforts,” the company wrote in a statement. .

CPKC said it was preparing for a “safe and orderly resumption” of operations and would “follow the CIRB’s orders once the minister’s instructions are implemented.” They haven’t lifted the lockdown yet.

“The Government of Canada has recognized the dramatic consequences of rail shutdowns on the Canadian economy, North American supply chains and all Canadians,” said Keith Creel, President and CEO of CPKC. “The Government has taken action to protect Canada’s national interests. We are grateful that the Government has had to “The intervention is regrettable because we fundamentally believe in and respect collective bargaining; however, this situation requires action given the stakes of all involved.”

The Canadian Rail Truckers Association told CNBC the picket lines will remain in place while they review MacKinnon’s referral and CIRB’s response and consult with their legal counsel to determine next steps. “By resorting to binding arbitration, the government is allowing CN and CPKC to sidestep unions determined to protect rail safety,” the statement read. “Despite claiming to value and respect the collective bargaining process, just hours after the employer-imposed work stoppage, The federal government has been quick to use its powers to suspend collective bargaining proceedings, a move that mirrors their intervention earlier this year when they used the CIRB to stifle negotiations for months.”

The Canadian Teamsters Association confirmed to CNBC that they will meet with the CIRB tonight for a case management meeting.

Cross-border rail trade with the United States is at a standstill, accounting for 14% of the $382.4 billion in total bilateral trade between the two countries in the first half of this year, according to the U.S. Department of Transportation. According to U.S. Census data, approximately $572 million in container trade arrives in the United States from Canada every day.

Railroads are an important part of corporate logistics, with companies from Dow Chemical Co. to Detroit-based automakers such as Ford and General Motors using them to transport auto parts. Retailers such as Walmart, Target, Nike, Procter & Gamble and Canada Goose also import some goods into Canadian ports and then transport them by rail and truck. According to Everstream Analytics, 66% of cargo arriving at the Port of Vancouver is transported by rail to a final destination in Canada or the U.S. Midwest, including fertilizers, iron ore, grains, cement, salt, potash, coal, automobiles, lumber/ Timber and containers containing consumer goods or intermediate parts.

Steve Lamar, president and CEO of the American Apparel & Footwear Association, urged union and management representatives to return to the bargaining table until a long-term agreement is reached.

“Railways are an important part of the ecosystem and help you get dressed every day,” Lamar said. “Canadian National’s shutdown/suspension, and Canadian Pacific Kansas City’s The strike comes at a crucial time for back-to-school and coincides with peak holiday inventory, with about 30% of clothing, shoes and accessories being diverted.

Union Pacific CEO Jim Vena wrote in a letter to Canadian Labor Minister Steve MacKinnon that his railroad has more than 2,500 cars that may be trapped. Canada. “Each day of disruption is expected to require at least three to five days of recovery time, and could be even longer given that two of Canada’s railways are affected.”

Ocean carriers and Amtrak announced contingency plans and charges ahead of the shutdown, with Hapag-Lloyd adding a $350 per bill of lading rerouting fee for North American imports destined for Canadian ports and Delivery within the continental United States. Maersk and Norfolk Southern adjust business plans ahead of possible strike. CMA CGM issued a notice detailing possible diversions of ships to U.S. ports and restrictions on rail transportation. Ocean carriers on Thursday began declaring force majeure, the legal power to waive contractual requirements due to circumstances beyond their control, according to a customer advisory sent by Ocean Network Express (ONE), one of the world’s largest shipping lines, seen by CNBC.

The company has also begun enforcing embargoes on certain intermodal shipments across its network, including hazardous materials and temperature-controlled containers.

According to Rob McRae, vice president of transportation at Univar Solutions, North America’s largest chemical and raw material distributor, U.S. chemical exports to Canada will be worth $28.5 billion in 2023, accounting for 17.4% of total U.S. chemical exports.

“These types of disruptions have huge downstream impacts on our supply chain,” McRae said. “Canada ranks first in U.S. exports, and the U.S. imports $24.3 billion worth of chemicals from Canada each year, and we hope both sides can reach an agreement quickly and not let this strike negatively impact not only our industry, but our country.”

Chemicals involved in the rail battles include sulfuric acid used in gutter cleaning products, phosphates used in laundry detergent and acetone used in the nail industry as a solvent to break down grease and wax. The sodium fluoride and sodium bicarbonate (also known as baking soda) in toothpaste travel through Canada’s West Coast ports and then by rail. Other products shipped to the United States include paint, food, energy drinks, water purification and personal care products.

Paul Brashier, vice president of global supply chain at ITS Logistics, warned that trucking rates will rise as customers look to transport rail freight by road.

“Operations will grind to a halt and everything, domestic and international container freight, will have to be moved to the road,” Brashear said. “That demand can drive rates through the roof.”

Logistics experts told CNBC they still hope for a quick resolution through negotiated contractual solutions or Canadian government intervention, such as action by parliament.

The length of railroad worker shifts and the amount of rest time workers are given between shifts is a sticking point in the negotiations.

Paul Bingham, director of transportation consulting at S&P Global Market Intelligence, said a disruption of one or two days would have a serious impact. The lasting impact on the economy is minimal, and the impact of disruptions beyond that tends to grow every day, largely because it takes longer and longer for transportation systems and supply chains to recover after the disruption ends. “As backlogs continue to build at the intersection of production and the rail network, it will take longer and longer to deal with the backlog, which will take time and increase costs,” Bingham said.

The data reflects limited front-loading of energy and chemicals.

Companies are feeling the pressure on supply chains after a 13-day strike by the ILWU Canada union last summer affected Canadian rail services. The Canadian Manufacturers and Exporters Association estimated last year that port strikes were disrupting $380 million worth of trade every day, and logistics experts warned that a double-track strike could cause even greater damage to the Canadian economy.

Canadian railways transport approximately CAD$277 billion worth of cargo every year, with 75% of exports shipped to the United States via CN and CPKC. Canadian railways connect key U.S. hubs such as Chicago, New Orleans, Minneapolis and Memphis.

Last year’s strike at Canada’s West Coast ports severely impacted rail freight, with the backlog taking months to clear.