CN and Canadian Pacific Kansas City (CPKC) report that lockdowns could begin as soon as Aug. 22 unless there is progress at the negotiating table or binding arbitration with Teamsters Canada Rail Conference (TCRC). UPDATE: Canadian Minister of Labor Steven MacKinnon will meet with all parties on Aug. 20 and Aug. 21. Union Pacific (UP) CEO Jim Vena, a 40-plus-year U.S. and Canadian railroad veteran, in an Aug. 19 letter requested MacKinnon‘s “urgent intervention to avoid freight rail service disruption in Canada, which would have devastating consequences for the Canadian and U.S. economies.”
CN and CPKC are in separate negotiations with the TCRC, which represents a combined 10,000 (approximately) engineers and conductors at both railroads. CN on Aug. 16 and CPKC on Aug. 18 returned to the bargaining table, but continued to take steps for a “safe and orderly shutdown of railway operations in Canada.” Late on Aug. 18, TCRC served strike notice to CPKC, and CN issued a formal advisory of its intention to lock out Canadian TCRC-represented employees.
According to UP‘s Jim Vena, it is “imperative” that Steven MacKinnon intervene to prevent a work stoppage. In an Aug. 19 letter to MacKinnon, obtained by Railway Age, Vena said he was requesting “urgent intervention to avoid freight rail service disruption in Canada, which would have devastating consequences for the Canadian and U.S. economies.” He continued: “North American railways are highly integrated—a Canadian rail shutdown would directly impact cross-border traffic, causing a significant ripple effect in the U.S.
“About a third of the traffic moved by Canadian railways crosses the Canada-U.S. border, impacting Union Pacific and our customers. For Union Pacific specifically, in the event of a shutdown, more than 2,500 cars per day would not move across the border. Some of these impacts have already begun. While some Canadian port traffic is shifting to the U.S., any strike or lockout will have a negative impact on the entire rail industry. For every one day of disruption, you can expect at least 3-5 days of recovery – perhaps even more, given two Canadian railways are impacted.
“I spent most of my life and career in Canada, including 40 years working at the CN where I started as a unionized employee, so I deeply understand both the Canadian and U.S. rail systems. I am in a unique position to share my thoughts and perspectives on these dynamics with you, if you believe I can be helpful.
“Ultimately, I must reiterate how imperative it is that you intervene to prevent a work stoppage. The impacts of a prolonged shutdown will have devastating consequences on the North American economy, with significant cascading effects. Along with supply chain delays and shortages, mines, grain elevators, factories, mills and other industries will incur increased costs when they lose their rail service. They will be forced to shut down or find costly, last-minute temporary alternatives – and in many cases, there are no alternatives to rail. Consumers and workers across multiple industries in both Canada and the U.S. will be severely impacted. Specifically, cross-border commodities such as chemicals, lumber products, automobiles, auto parts, agricultural products and other customer goods will be impacted.
“Thank you for considering the serious impacts at hand and the urgent need to act using any and all available resources. Do not hesitate to call me personally if my perspective can be of assistance as you intervene to avoid a work stoppage.”
According to an Aug. 19 Reuters report, “[r]oughly 30% of freight rail operations in Canada cross the northern border annually, the Association of American Railroads said on Tuesday. In the first half of the year, rail transport accounted for about 14% of the total bilateral trade of $382.4 billion between the U.S. Canada, according to the U.S. Department of Transportation.”
The Canadian Federation of Independent Business (CFIB) is “calling on all parties to reach an immediate agreement to prevent a work stoppage. Any disruptions to railway operations could be devastating for small businesses, their employees and communities,” said Jasmin Guenette, Vice President, National Affairs. “Many small businesses rely on rail services to send and receive goods, products and essential materials. The longer the work stoppage goes on, the costlier it becomes for small firms who may lose sales and contracts if goods are not delivered or received on time. These shutdowns will also disrupt public transit and commuting to big cities such as Toronto or Montreal and lead to increased business costs and supply chain disruptions. Although the decision by the Canada Industrial Relations Board (CIRB) prohibited the maintenance of certain activities during a work stoppage, politicians still have the power to change labour laws. CFIB continues to call on the government to make ports and rails an essential service, so they remain fully operational at all times.”
On Aug. 19, Steven MacKinnon‘s office announced that he “will be in Montreal tomorrow [Tuesday, Aug. 20] and Calgary on Wednesday [Aug. 21] to meet with the parties and federal mediators and urge CN Rail, CPKC and Teamsters to fulfill their responsibility to Canadians, reach agreements at the bargaining table, and prevent a full work stoppage,” according to a CBC News report. In a statement earlier on Aug. 19 (see below), the Minister encouraged the parties to reach a deal.
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“Under article 107 of the federal labor code, Labour Minister Steven MacKinnon has broad powers and can order the sides to enter binding arbitration,” Reuters reported Aug. 19. “In 2023, his predecessor, Seamus O‘Regan, issued such an order to end a dockworkers strike in British Columbia. In that case, unlike the current rail dispute, the sides had largely agreed on the outlines of a deal.”
Canada‘s “main business lobby group said it estimates losses would hit C$1 billion ($733 million) a day in case the rail stoppages proceed,” according to a separate Reuters report.
CN on Aug. 9 requested an order of binding arbitration from MacKinnon, which would prevent a work stoppage, but MacKinnon rejected it.
“After careful consideration of this request by Canadian National Railways Company, I have decided not to proceed with a section 107 referral,” MacKinnon wrote in a Aug. 14 letter released by the TCRC. “Consistent with our discussion on August 5, 2024, I would like to clarify that it is your shared responsibility—Canadian National Railways Company and the Teamsters Canada Rail Conference—to negotiate in good faith and work diligently towards a new collective agreement. To support this process, mediators from the Federal Mediation and Conciliation Service remain available to work with you to facilitate productive negotiations and help bridge any gaps. I trust that with continued effort, an agreement can be achieved promptly. The Government firmly believes in the collective bargaining process and trusts that mutually beneficial agreements are within reach at the bargaining table.”
In an Aug. 15 media statement, CN spokesperson Jonathan Abecassis said that “[w]hile we are disappointed the minister is choosing not use section 107 of the Canada Labour Code at this time, we hope TCRC will listen to the minister’s strong message that they must get serious and engage meaningfully at the negotiating table. The minister must reconsider his decision if they don‘t.” Abecassis reported that CN since January has made four offers to the TCRC, covering “important points such as compensation, availability and improving safety,” but the “TCRC has rejected all offers and has not proposed a single counter offer.” As noted on Aug. 9, he said that “CN has initiated a phased shutdown of its Canadian network,” and “unless there is meaningful progress at the negotiating table, the company will have no choice but lockout employees on August 22.” A prolonged shutdown of rail operations, he continued, “will have a significant impact on supply chains: creating delays, possible shortages, and increasing costs as mines, grain elevators, factories, mills and other industries lose their rail service and must either shutdown or find costly, last-minute and temporary alternatives, when possible.”
TCRC in a media statement “said that it agrees with the minister’s conclusion that a negotiated settlement is within reach,” according to an Aug. 15 CBC News report.
CN on Aug. 16 reported returning to the bargaining table with TCRC, saying that it hoped the union “will engage meaningfully during this meeting.” It noted that “[a]s there has been no meaningful progress at the bargaining table, CN has initiated the phased and progressive shutdown of its network to ensure the safety of the communities in which we operate and our customers cargo.” The process started with embargoes and “will culminate in a lockout at 00:01 ET on August 22 unless a deal is reached, or arbitration is imposed.” The railroad said it was doing this because “it takes more than 72-hours, which is the required notice before any work stoppage, to help ensure a safe, predictable, and orderly shutdown of our network.”
Additionally, the railroad shared “facts about the negotiations to clear up any misconceptions about key issues that are the subject of rumors or questions”:
- “None of CN’s offers have compromised employee health and safety in any way. In fact, CN’s offers aim to improve safety. And all of CN’s proposals respect government-mandated rest provisions (Duty and Rest Period Rules), which were developed in consultation with the Union to ensure best practices are in place to manage fatigue.”
- “CN has made four different offers to the TCRC since January. The first three offers addressed a wide range of topics, including wages, rest, health and safety, and labour availability. The latest offer proposed third-party arbitration to avoid a strike or lockout. The third-party essentially plays the role of a judge, resolving the dispute. The Union rejected all of those offers. The Union has not made any counteroffers. CN remains ready to engage in constructive dialogue with the Union.”
- “CN does care. CN knows that employees are spending more time at the away from home terminal (AFHT). CN offered to remove employees being put to bed enroute or tied up between terminals (except in emergency situations), and the removal of turn around trips at the “away from home” terminal (AFHT). This offer was rejected by the Union. Held-away is an important element in this round of bargaining. CN wants to set a standard maximum time that all employees can spend at the AFHT. This is part of the efforts to make all TCRC-represented employees equal.”
- “12-hour shifts are common in the railway industry and exist currently for some TCRC-represented employees on CN’s network. CN is offering to ensure employees spend more time at home, in exchange for working 12-hour shifts. Under the Duty Rest Period Rules, employees can work up to 12-hour shifts.”
- “No employees will be forced into a Mobile Workforce. Bidding this job would be 100% voluntary. Assignments would be for a maximum of three months, and employees would have three cycles of 28 days away with a 7-day break to return home. Travel (i.e., airfare, train, taxi, etc.), hotel, and food are entirely paid by CN. On top of their earnings, employees who choose Mobile Workforce positions would receive a $1,000 premium per week.”
CN added that, currently, “by combining Duty and Rest Period Rules (DRPR), paid sick days, personal leave days, and existing rest and vacation provisions in their collective agreements, conductors and locomotive engineers currently work approximately 160 days a year.” As far as wages, “in 2023, the average locomotive engineer earned approximately C$150,000, not including pension and medical benefits. In 2023, the average conductor earned approximately C$121,000, not including pension and medical benefits. In January, CN offered the TCRC a modernized agreement that improved safety, wages, and work/life balance while protecting acquired rights. This offer was refused. The offer was then improved in April with a focus on better wages (C75$/hour for Locomotive Engineers and C65$/hour for Conductors), job security, and guaranteed earnings for employees. The TCRC refused the improved offer. In May, CN then presented a simplified offer within the framework of the existing collective agreement with improved wages and predictable days off, which the TCRC also refused. In the absence of a path forward, CN offered to voluntarily submit to binding arbitration in June. Binding arbitration is a process where both parties empower a mutually agreed upon independent arbitrator to determine the terms of a settlement. It is an impartial approach that would achieve a resolution while avoiding a costly disruption to supply chains, Canadian consumers, and the Canadian economy. The TCRC refused this offer.”
CPKC on Aug. 16 said it remains committed to “bargaining in good faith,” with bargaining scheduled to continue Aug. 18. “As previously indicated, CPKC has served notice to lock out Teamsters Canada Rail Conference (TCRC) Train and Engine (T&E) and Rail Traffic Controller (RCTC) employees at 00:01 Aug 22, unless TCRC leadership and the company are able to come to negotiated agreements or agree to binding interest arbitration,” the railroad reported. “For the T&E division, CPKC is focused on a status quo-style contract renewal covering three years with competitive wage increases that are consistent with recent settlements with other railway unions and maintains the status quo for all work rules. The status quo-style offer fully complies with new regulatory requirements for rest and does not in any way compromise safety. For the TCRC – RCTC division, CPKC has also proposed a renewed agreement with the rail traffic controllers which would deliver competitive wage increases.”
While CPKC said it “continues to move as much freight as possible prior to a potential work stoppage, we are taking steps for a safe and orderly shutdown of railway operations in Canada:
- “On Monday, Aug. 12, embargo for all toxic by inhalation and poisonous by inhalation dangerous goods traffic originating in Canada or destined to a Canadian location took effect.
- “As of Thursday, Aug. 15, CPKC is not accepting loaded intermodal shipments classified as dangerous goods. This applies at all intermodal facilities for both domestic and international shipments destined to, or originating from, terminals and ports located in Canada.
- “Effective Saturday, Aug. 17, embargo expanded to other dangerous goods including all Rail Security Sensitive Materials (RSSM) as well as the Time Sensitive Commodities.
- “Effective Monday, Aug. 19, embargo expanded for all other dangerous goods shipments.
- “Effective Tuesday, Aug. 20, embargos for all shipments originating in Canada, all shipments originating in the United States destined to Canada, and all carload traffic destined to Canadian interchange.”
The railroad said it is communicating directly with its customers “as additional embargoes and intermodal terminal restrictions for temperature controlled containers and other intermodal containers are implemented, as necessary.”
CPKC also reiterated “its standing offer to resolve this matter through binding arbitration should negotiations be unsuccessful.” Binding arbitration, it said, is a “responsible, reasonable, and fair path forward that would resolve this dispute without causing even more unnecessary harm and disruption to supply chains and our economy. All this uncertainty and disruption could be ended today if the TCRC would agree to binding arbitration.”
Late on Aug. 18, TCRC reported online that it had served CPKC a ”72-Hours-Notice to withdraw our services, to be effective Thursday August 22 at 0001 Eastern Time, to protect the TCRC’s statutory and Charter protected rights to engage in a lawful strike.” It said it is ”continuing to bargain with the Company and will remain at the table as long as it takes”; it ”remains committed to achieving an agreement that is acceptable and in line with the demands received by each Division.” This move follows CPKC’s recent notice to lock out TRTC employees.
Also late on Aug. 18, CN reported issuing notice to the union ”formally advising them of its intention to lockout Canadian TCRC-represented employees on Aug. 22 at 00:01 ET unless an agreement or binding arbitration is achieved before that time.” It said that “[d]espite negotiations over the weekend, no meaningful progress has occurred, and the parties remain very far apart.” Unless there is ”an immediate and definite resolution to the labour conflict,” CN said it will have ”no choice but to continue the phased and progressive shutdown of its network which would culminate in a lockout.” It noted that additional embargoes will be issued Aug. 19.
All Class I’s Issue Customer Advisories
Ahead of the potential work stoppage, traffic embargoes have been issued by both Canadian carriers and U.S. Class I’s CSX, Norfolk Southern, BNSF and Union Pacific for traffic that interchanges with them.
CPKC on Aug. 9 reported that it “will issue an embargo for all toxic by inhalation (TIH) dangerous goods traffic to allow this traffic to safely exit the rail network prior to a work stoppage. Other embargoes will be issued during the cooling off period, as necessary.” CN on Aug. 13 initiated what it called “the first step of a phased and progressive shut down” of its rail network in Canada, “due to the absence of progress at the negotiating table and the absence of arbitration.” The railroad started to embargo certain hazardous materials, such as chlorine, bromine, ammonia, chloropicrin, and ethylene, which “can’t be left out on the railroad unsupervised in the event of a labor stoppage.”
“By stopping the shipment of hazardous goods while ensuing that the railcars containing them currently on the network are safely delivered, CN aims to remove as much of them from its Canadian network ahead of a possible labour stoppage,” the railroad said.
In an Aug. 12 notice to customers, CSX said it is “proactively taking measures to safeguard the transportation of highly hazardous, toxic inhalation hazards (TIH) and poisonous inhalation hazards (PIH) materials amid the potential rail labor disruption affecting Canadian railroads.” Effective immediately, the Class I railroad said it is placing an embargo on all TIH/PIH shipments to and from CN and CPKC. Should the labor negotiations reach an impasse, it noted, delays and service suspensions may occur. “We will continue to monitor the situation and provide updates as warranted,” CSX said. “CSX is committed to ensuring the highest standards of safety during this time. We appreciate your understanding and cooperation.” Additionally, on Aug. 15, customers were told that “effective 48 hours from now, CSX will implement an embargo on cross-border shipments to and from the CN and CPKC railroads.” Shipments on CN and CPKC with U.S. originations and destinations are not included in the embargo, the railroad said, and the embargo on “all hazardous and security-sensitive materials, including Toxic Inhalation Hazards (TIH) and Poisonous Inhalation Hazards (PIH), originating or terminating on the Canadian railroads, remains in effect.”
Similarly, in an Aug. 13 alert, Norfolk Southern (NS) told customers that it is “closely monitoring a potential labor work stoppage“ and is “subsequently issuing an embargo on TIH, PIH, and RSSM materials to/from the CN and CPKC railroads effective immediately to allow time for these materials to exit the system before the potential work stoppage.” Additional embargoes may be issued as a result of the potential work stoppage, the railroad said. On Aug. 16, NS issued another alert, telling customers that it continues to monitor the potential work stoppage affecting rail traffic to and from Canada. “Previous guidance has indicated an all-commodity embargo could go into effect at 12:01 am, Monday, August 19,” it reported. “Absent any labor settlement, NS anticipates issuing an embargo for all traffic originating or terminating in Canada with an effective time of 12:01 am, Monday, August 19.” On Aug. 19, NS told customers that it “continues to monitor the potential work stoppage affecting rail traffic to/from Canada.” CN and CPKC, it said, “have issued all-commodity embargoes”: CPKC (Embargo: CPRS002121), effective 12:01 am August 20, 2024, and CN (Embargo: CN001224) effective 12:01am August 22, 2024. “These two embargoes cover all NS originated traffic destined to Canada and all Canadian originated traffic destined for NS destinations for all commodities,” the railroad said. “Current NS embargoes NS001524 (Haulage traffic to Rouses Point) and NS001424 (TIH/PIH shipments) remain in effect.”
Union Pacific in a customer advisory referenced CN Embargo #CN001524, which covers all intermodal traffic destined to all points in Canada from U.S. origins and U.S. interchange: “Effective Friday, August 16, 2024 at 00:01, waybills for traffic originating at UP terminals destined to CN terminals in Canada will not be accepted for the duration of the embargo. Waybills originating at a Mexico origin, including Falcon Premium shipments, will also not be accepted. Shipments in the pipeline can continue to be cross-towned to CN in Chicago through Wednesday, Aug. 21, 2024. We continue to closely monitor the Canadian railway labor negotiations and are in close contact with our interchange partners, adhering to other Class I railroad embargos. As always, we will work to support our customers’ needs.”
“While the potential Canadian lockout does not impact BNSF operations, shipments moving to and from Canada through interchange with the Canadian railroads will not be moved during a work stoppage,” BNSF said in a customer advisory. “Should a work stoppage occur, BNSF will continue to work closely with the Canadian railroads and be prepared to get shipments moving safely and quickly when normal interchange operations are able to resume.”
The Surface Transportation Board (STB) on Aug. 14 said it was “actively monitoring” the potential for a rail labor strike. Aware that embargoes have been issued related to it and that their ”scope could expand in the coming days,” the Board noted that it is “monitoring the implementation and effects of those embargoes on the network.”
The STB encouraged rail carriers, shippers, and other stakeholders experiencing rail service disruptions related to the potential strike to contact its Rail Customer and Public Assistance program. To request assistance, interested persons may email RCPA@stb.gov or call (202) 245-0238 or (866) 254-1792.
Background on Negotiations
Separate negotiations with the TCRC have been under way at intervals for the Canadian Class I’s, with the assistance of federal conciliators. Bargaining started in 2023. TCRC on May 1 announced that nearly 10,000 workers at CN and CPKC had voted to reauthorize strikes at both railroads, if negotiated settlements could not be reached.
Negotiations, however, had been on hold since May 9 when former Minister of Labor Seamus O’Regan requested clarity from the Canada Industrial Relations Board (CIRB) regarding essential services during a potential work stoppage. O’Regan on July 19 resigned from his post.
“[T]o try to build momentum toward a deal,” O’Regan successor Steve MacKinnon called the parties to an Aug. 5 meeting, CBC News reported. Transport Minister Pablo Rodriguez also attended. Negotiations restarted Aug. 7.
On Aug. 9, the CIRB issued a decision determining that no services need to be maintained during a railway strike or lockout in order to protect Canadian public health and safety. The CIRB also ordered a 13-day extension of the cooling off period that ends Aug. 22. Following the expiration of the cooling off period, a legal strike or lockout involving the TCRC could occur.
CPKC on Aug. 9 reported that it would issue notice to the TCRC – Train and Engine (T&E) division and TCRC – Rail Traffic Controller (RCTC) division of “its plan to lock out employees at 00:01 ET on Aug. 22 if union leadership and the company are unable to come to a negotiated settlement or agree to binding interest arbitration.” CPKC said it is “committed to continuing good faith negotiation throughout.”
“All stakeholders want an end to this needless uncertainty as rapidly as possible so that we can continue serving the North American economy,” CPKC said. “Stability could be restored today if the TCRC would accept CPKC’s offer to resolve the current labor dispute through binding interest arbitration. If no resolution is reached during bargaining through the extended cooling off period, and the TCRC continues to refuse binding interest arbitration, CPKC will have no choice but to take this action [and lock out employees]. CPKC is acting to protect Canada’s supply chains, and all those who depend on them, from the more widespread disruption that would be created should a work stoppage occur during the fall peak shipping period. Delaying resolution to this dispute only makes things worse, causing more disruption and damage to Canada’s international reputation as a reliable trading partner.”
CPKC said it was providing “this public notice to mitigate uncertainty and give our customers and supply chains proper time to plan for a safe and orderly shutdown of railway operations.” The railroad noted that it will issue an embargo for “all toxic by inhalation (TIH) dangerous goods traffic to allow this traffic to safely exit the rail network prior to a work stoppage”; other embargoes, it said, “will be issued during the cooling off period, as necessary.”
Additionally, CPKC said that in response to opposition from TCRC leadership, the railroad has advised the union representing conductors and locomotive engineers “that we will conditionally withdraw the offer for a new modernized, time-based collective agreement.” That agreement, it said, “was intended to address the union’s concerns related to work and time off scheduling, while allowing significant wage increases and additional customer service flexibilities.” The railroad said it will instead “focus on a status quo-style contract renewal covering three years with competitive wage increases that are consistent with recent settlements with other railway unions and maintains the status quo for all work rules.” The status quo-style offer, it explained, ”fully complies with new regulatory requirements for rest and does not in any way compromise safety.”
According to CPKC, for the TCRC – RCTC division, the railroad “has also proposed a renewed agreement with the rail traffic controllers which would deliver competitive wage increases.”
CN on Aug. 9 reported that because the CIRB decision “does not bring the labor conflict any closer to a resolution,” and the TCRC “has not engaged meaningfully” during resumed negotiations, CN is requesting an order of binding arbitration from the Minister of Labor under section 107 of the Canada Labor Code “to protect Canada’s economy from the impacts of prolonged uncertainty.”
“While CN is willing to keep negotiating with the TCRC, the company has lost faith in the process and is concerned that a negotiated deal is no longer possible without a willing partner,” the railroad said. “Unless there is immediate and meaningful progress at the negotiating table or binding arbitration, CN will have no choice but to begin a phased and progressive shutdown of its network, starting with embargoes of hazardous goods, which would culminate in a lockout at 00:01 Eastern Time on August 22nd. Since the beginning of the year, CN has made four offers to the TCRC. The offers included points on wages, rest, and labor availability while remaining fully compliant with the government-mandated rules overseeing duty and rest periods. None of CN’s offers compromised safety in any way. The latest offer proposed third-party arbitration. The union rejected all offers and has made no counter-proposals.”
Supply chains “require predictability to function properly,” CN concluded. “Unfortunately, even the possibility of an unpredictable labor disruption and subsequent disorderly shutdown creates a safety risk and unacceptable uncertainty for industries that depend on rail. Prolonged uncertainty will impact consumers and workers across industries and across Canada.”
TCRC leadership in an Aug. 9 statement to its members said that “Your Union will continue to move forward concentrating on our commitment to our Members to achieve what we believe is most beneficial and fair.” While the TCRC said its Bargaining Committee “is committed to negotiating a new Collective Agreement, we must move forward and prepare for the work stoppage.”
Also on Aug. 9, the Canadian Manufacturers and Exporters (CME) called for emergency meetings of the House of Commons Standing Committee on Transportation following the CIRB decision regarding a potential railway work stoppage. “A national rail stoppage of any length will have a catastrophic impact on Canadian manufacturers and their workers,” according to the group, which noted that a recent CME survey of 226 manufacturers found:
- “66% of manufacturers said a strike will have severe consequences on their operations.
- “92% of manufacturers expect delivery delays, 76% expect to face increased costs, 57% expect reduced sales and 49% say it will reduce competitiveness.
- “Manufacturers would incur an average financial impact of [C]$275,000 each day of a stoppage (combined decreases in revenues and increases in expenses).
- “77% of manufacturers believe these labour stoppages have negatively influenced foreign investors’ views of Canada.
- “88% of manufacturers support federal government intervention to prevent strikes at critical infrastructure sites, including railways.”
Grain shippers, too, are calling on CN, CPKC, TCRC and the government of Canada to ensure that a rail strike does not occur. “For the grain sector, this rail strike is coming at the worst possible time of year, right before the start of harvest,” said Wade Sobkowich, Executive Director of the Western Grain Elevators Association, on Aug. 12. “To make matters worse, both CN and CPKC will shut down at the same time, stopping virtually all of Canada’s domestic and export grain flow.” According to the Association, grain elevators situated on either CN or CPKC lines do not have any competitive options in shipping grain to flour mills, grain processing facilities and feedlots both domestically and internationally; rail service, it said, is essential to get grain off the Prairies to customers and ports across North America and globally.
“The TCRC, CN, CPKC and the federal government need to recognize that their action or inaction will have serious consequences,” Sobkowich said. “The impacts will be felt mostly by Canadian consumers at the grocery store, both in terms of price and supply. The world needs Canada’s grain now more than ever, and it is unconscionable that anyone would leverage the current domestic and global circumstances to benefit their individual interests.” The Western Grain Elevators Association is urging the parties to “complete the negotiations in good faith, or submit to binding arbitration for a fair and reasonable resolution.”
The TD Cowen Insight (Aug. 12)
By Cherilyn Radbourne and Patrick Sullivan
We have characterized this development as SLIGHTLY POSITIVE, because a work stoppage at one/both CN and CPKC seemed all but inevitable unless the CIRB declared rail an essential service and removed the workers’ right to strike, which we saw as unlikely. From our perspective, the sooner the industry can get past a work stoppage and return predictability to the supply chain, the better.
Event
On Friday [Aug. 9], the CIRB ruled that a work stoppage at CN and CPKC would not cause an immediate threat to public health and safety.
Impact: SLIGHTLY POSITIVE
The CIRB imposed a 13-day cooling-off period, which expires on Aug. 22. CN and CPKC have indicated that they will lock out employees if their separate contract negotiations with the TCRC are not resolved by August 22 at 00:01. Historically, work stoppages on the Canadian rail network have lasted approximately 7-10 days; however, there has never been a simultaneous outage at CN and CPKC before, which will likely put pressure on the government to intervene sooner vs. later. Shutting down the Canadian rail network will damage the economy in any scenario, but having a labour outage in August, prior to the grain harvest, will reduce the impact, at the margin.
CN and CPKC have indicated that the uncertainty caused by the CIRB process has exerted an unquantifiable drag on Canadian rail traffic since May 13, particularly in international intermodal, where customers have a longer planning horizon, and can choose to divert volume to U.S. ports. CN has a larger international intermodal franchise than CPKC, and Prince Rupert moves a lot of intermodal traffic bound for the U.S.; therefore, CN has been more impacted vs. CPKC.
CN has asked the federal labor minister to order binding arbitration to protect the economy, but has also indicated that, unless there is immediate and meaningful progress at the negotiating table, or binding arbitration, it will have no choice but to begin a phased and progressive shutdown of its network, starting with embargoes of hazardous goods.
Likewise, CPKC indicated that if no resolution is reached during bargaining through the extended cooling-off period, and the TCRC continues to refuse its offer of binding arbitration, CPKC will have no choice but to lock out employees. As part of a safe and orderly shutdown of railway operations, CPKC will start by issuing an embargo for all toxic by inhalation dangerous goods traffic, with other embargoes following, as necessary.
The TCRC has characterized the lockout notices as an unnecessary escalation that goes against the principles of good-faith bargaining.
For background on the bargaining negotiations, read: “Canadian Class I’s, TCRC Bargaining Updates.”
