Railroad Shutdowns in Canada: Impact on Supply Chains

Railroad Shutdowns in Canada: A New Supply Chain Challenge

On Thursday, Canada’s two primary railroads, Canadian National and Canadian Pacific Kansas City, halted operations after failing to reach an agreement during contract negotiations with a labor union. This disruption presents yet another significant challenge for North American businesses, which have already faced numerous supply chain issues over recent years.

The extensive rail networks of these companies play a vital role in Canada’s economy and serve as essential channels for exports to the United States, Mexico, and various other countries. With the rail shutdown in effect, companies are now scrambling to seek alternative modes of transportation. However, for certain cargo types, particularly grains, there are few viable options besides rail.

Implications of the Shutdown

Brian Whitlock, an analyst at Gartner, a prominent research firm, commented, “The longer this situation persists, the more detrimental the effects will be on supply chains, especially for products that lack alternative transportation solutions.”

It is noteworthy that Canadian National’s network extends into the United States, while Canadian Pacific Kansas City has operational ties with both the United States and Mexico. Notably, the companies’ networks outside of Canada remain functional, as workers in these regions are governed by different labor agreements.

How Severe Could the Impact Be?

Canada has a history of rail labor disruptions, having experienced strikes in 2015 and 2019 that concluded within days. The federal government possesses the authority to intervene and compel the Teamsters Canada Rail Conference, the rail workers union, and management to accept an arbitrated resolution.

However, the government has, at least for the moment, refrained from intervening. Prime Minister Justin Trudeau and his Liberal Party depend on the support of the New Democratic Party, which has roots in organized labor, to secure the parliamentary votes necessary to maintain their governance.