Canadian Freight Rail Disruptions Could Impact US Supply Chain

Canada's two main railway companies, Canadian National Railway and Canadian Pacific Kansas City, are on the verge of a strike that could inflict billions of dollars' worth of economic damage — and hurt the US supply chain.

Contract talks between the Teamsters union and the companies usually take place a year apart, but in 2022, after the federal government introduced new rules on fatigue, CN requested a year-long extension to its existing deal rather than negotiate a new one, Reuters reported.

The companies say they will start locking out workers early Thursday if they can't reach a deal, while the union says it is ready to call a strike for that day.

CPKC has already given formal notice of a lock-out. CPKC, created in 2023 through a merger of Canadian Pacific and Kansas City Southern, has a US and Mexican network which it says will operate normally. CN also says trains on its US network will run.

However, the American Chemistry Council sees something else, due to the North American freight rail network being critical to the Canadian flow of goods.

Chris Jahn, president & CEO of ACC wrote a letter to the US National Security Council and the National Economic Council.

In it, he shares his concern about a potential system-wide freight rail disruption in Canada that would have immediate and long-term consequences to US supply chain resilience.

He added that there has been limited progress at the negotiating table and a full system disruption looks increasingly likely. A system-wide rail shut down would have devastating impacts on rail shippers and could increase the risk of supply shortages of vital products such as drinking water treatment chemicals, fuel, and agricultural products in the US, Jahn explained.

"Extended disruptions will lead to significant and widespread harm across North America. The interdependence of US and Canadian facilities is key to chemical supply chains," Jahn wrote. "Movement of chemicals across the US-Canadian border supports industries in both countries - more than 80% of basic & specialty chemicals are sold directly to the industrial sector to produce goods. Last year, US firms sold more than $28 billion in chemicals to customers in Canada and we import about $25 billion in chemicals from Canadian partners annually."

A rail disruption in Canada would greatly impact US supply chains, including facilities in Texas, Louisiana, Pennsylvania, and New York that rely on Canadian suppliers and would face challenges sourcing raw materials.

The letter was dated Aug. 6, 2024, so we will see if US officials have a say in this possible momentous outcome. There has been no word thus far.