Canada railroads may lock out workers starting 22 August

TORONTO (ICIS)–Freight railroads Canadian Pacific Kansas City (CPKC) and Canadian National (CN) may start to lock out workers on 22 August:

• CPKC will issue notice to labor union Teamsters Canada Rail Conference (TCRC) “of its plan to lock out employees at 00:01 ET on August 22 if union leadership and the company are unable to come to a negotiated settlement or agree to binding interest arbitration”, it said in a statement.
• 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, “unless there is immediate and meaningful progress at the negotiating table or binding arbitration”, it said.

CN also requested the intervention of Canada’s federal labor minister, it added.

TCRC, for its part, said that it remains committed to negotiating new collective agreements.

The railroads’ lockout warning comes after the Canada Industrial Relations Board (CIRB) on 9 August imposed a 13-day cooling-off period in the labor dispute about wages, benefits, work scheduling and safety.

Canada’s chemicals, fertilizer and other industries have been facing the threat of a rail labor disruption for months now.

In early May about 9,300 unionized conductors, train operators and engineers at CN and CPKC voted for a strike as early as 22 May, while the labor minister referred the matter to the CIRB for a decision about a strike’s impacts on public safety and health.

With the referral, the minister suspended the right to strike as under law a legal strike or lockout could not occur until the board had made its decision.

The minister asked the CIRB to examine whether certain rail deliveries such as fuel, food and chlorine for water-treatment facilities should be declared essential services, allowing shipments to continue during work stoppages.

However, the CIRB ruled last Friday (9 August) that no rail activities needed to be maintained during a strike or lockout, thus clearing the way for industrial action after the expiry of the 13-day cooling off period.

IMPACT ON CHEMICALS
Trade group Chemistry Industry Association of Canada (CIAC) warned again of the impact of a freight rail disruption on Canada’s chemical industry and the overall economy.

“Canada’s economy relies on rail to keep products and commodities moving,” the group’s CEO, Bob Masterson, said in a statement.

Chemicals needed for water treatment and sewage treatment are shipped by rail, he said.

Many CIAC members were “captive” to CPKC and/or CN, with no viable alternatives for shipments, he said.

Companies producing highly regulated goods – about one-third of CIAC members – typically begin shutdown procedures before 72 hours’ notice of a strike or lockout is given, he said.

Although plants at some CIAC member companies can only operate up to two days without rail service before having to be shut down, most will be shut down within a week, he said.

The Canadian chemistry sector alone moves over 500 railcars/day, he said.

It would require over 1,500 road-based tanker trucks to carry the same load,  he said.

There was no “Plan B” because of a lack of availability of trucks and drivers and the additional cost of moving product over long distances, Masterson said.

Furthermore, many chemical products are restricted to move by rail due to their hazardous nature, he added.

According to CIAC, more than Canadian dollar (C$) 76 million (US$55 million) of industrial chemical products move on Canada’s rail network daily, or C$28 billion each year.

Chemicals account for nearly 10% of all Canadian rail traffic, the group said.

Furthermore, the chemical industry’s customers in the automobile, forest products, minerals and other industries ship most of their product by rail, it said.

CIAC is urging a negotiated solution to the conflict, it said.

However, should negotiations fail, Canada’s federal government “must be prepared to act quickly to order the parties to return to work and the negotiating table to protect Canadians, Canadian workers directly affected by the disruption, and the Canadian economy,” the group said.

The group added that the CIRB’s decision not to impose requirements to ensure the rail shipment of essential products – such as fuel, food or chlorine for water treatment – during industrial action was “concerning”.

FERTILIZERS
In the fertilizer industry, trade group Fertilizer Canada said that the railroads on Monday, 12 August, issued embargoes immediately halting certain fertilizer shipments 10 days ahead of an expected labor disruption.

The threat of a work stoppage has already begun to impact the movement of fertilizers, and the industry expects further embargoes and slowdowns in rail service, the group said.

A work stoppage that prevents the transportation of fertilizer would have “potentially disastrous effects” on crop yields and food security, it added.

Fertilizer Canada wants the government “to take immediate action to assist all parties” in reaching agreements, “including ordering a directive for binding arbitration that prohibits TCRC from undertaking strike action and CN and CPKC from lockout action,” it said.

Furthermore, the group is asking the federal government to recognize fertilizers as an essential good critical to domestic and global food security that should continue to move during work stoppages, it said.

Canada’s reputation has already been damaged by numerous supply chain disruptions in the recent past and the renewed labor uncertainty will give its international competitors an advantage, Karen Proud, CEO of Fertilizer Canada, added.

Canadian chemical producers rely on rail to ship more than 70% of their product, with some exclusively using rail, while in the fertilizer industry about 75% of all fertilizers produced and used in Canada is moved by rail.

The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic for the week ended 3 August  and the first 31 weeks of 2024:

In their recent earnings calls, midstream energy firms Pembina and Keyera, as well as fertilizer major Nutrien and others raised the looming rail disruption as a concern, and CN reduced its 2024 earnings guidance, citing the impact of the labor uncertainty.

Meanwhile, Canada continues to face the threat of new labor disruptions at its West Coast ports.

However, as of Monday, neither the BC Maritime Employers Association (BCMEA) nor trade union and International Longshore and Warehouse Union Local 514 issued the required 72-hour notices before a legal strike or lockout can begin.

(US$1=C$1.37)

Additional reporting by Al Greenwood

Thumbnail photo source: Keyera