Canadian Industry Groups Seek Swift Resolution To Canadian National Strike

Canadian industry groups that depend on the railways to deliver their goods both domestically and internationally ae pressing the parties to end the union strike at Canadian National (NYSE: CNI) soon.

Benzinga · 11/20/2019 19:14

Canadian industry groups that depend on the railways to deliver their goods both domestically and internationally ae pressing the parties to end the union strike at Canadian National (NYSE: CNI) soon.

Members of the Teamsters Canada Rail Conference began their strike on Nov. 19 against Canadian National (CN). The union, which represents conductors, trainspersons and yard workers, walked away from their jobs over issues related to safety, working conditions and benefits. The federal government is mediating the talks between the Teamsters and CN. 

CN estimates that it transports more than C$250 billion of goods annually via its Canadian and U.S. network.

"The Western Grain Elevator Association (WGEA) is urging the federal government to use any means at its disposal to ensure a labour disruption does not occur, including the introduction of emergency legislation if required," said WGEA executive director Wade Sobkowich. 

The strike comes at a time when there is an extremely difficult harvest due to grain quality issues, volumes still needing to be harvested and increasing trade restrictions, Sobkowich said. 

"The silver lining this fall has been rail service. With car order fulfilment percentages in the mid- to high-nineties, we have been able to count on CN to provide capacity for grain movements so we are not forgoing sales opportunities," Sobkowich said.

But "now, with a work stoppage situation, we run the risk of adding rail service to the list of issues shippers and producers are facing this year," he said.  

Sobkowich estimates that half of Canada's elevator locations are served by only CN, which then provides service to the ports at Vancouver and Prince Rupert. Because these grain elevators don't have other transportation options available, it impacts the elevators' ability to supply international customers and it lengthens the producers' delivery times, he said. The disruption also can result in higher costs as a result of delays, lost sales and demurrage, and it has the potential to add to the carry-out of grain tonnage at the end of the crop year on July 31, 2020, he said.

"We are extremely sensitive to these extra costs, not only for our members but for grain producers and customers," Sobkowich said.

Should the disruption continue, WGEA is urging the federal government to take action, including potentially reconvening the House of Commons prior to Dec. 5 to deal with the situation.

The Chemistry Industry Association of Canada (CIAC), whose members use rail exclusively to ship roughly 80% of their production, also pressed for federal intervention should the parties not come to a resolution.  

"Fully C$38 million worth of industrial chemical products rely on CN's network to get to their destinations every single day and that the economic impact of the work stoppage is C$1 million per day per facility that is shut down," said  Bob Masterson, President and CEO of CIAC. "Some of those goods are also essential to core public services such as water treatment. We urge both sides to consider the far-reaching and urgent economic implications the strike activity and work stoppage at CN is having on industry."

The CIAC said interruptions to rail service can result in chemical plants running out of storage capacity while also incurring shortages for incoming raw materials. Although some plants might have access to CN's competitor, Canadian Pacific (NYSE: CP), the plants have been told that CP's network isn't in a position to take on extra capacity, the association said.

"CIAC believes that a negotiated solution is always the preferred outcome. Should negotiations fail, however, the Government of Canada must be prepared to act quickly and in the national interest to order the parties to return to work and the negotiating table," CIAC said. 

The Forest Products Association of Canada (FPAC) also called for both parties to end the strike soon, saying that Canada's forest products often originate in remote locations where there are limited transportation options. The disruption is also occurring amid an ongoing truck driver shortage, making it harder for forest products producers to secure competitive transportation costs, the group said.

 "While FPAC respects the collective bargaining process, and the right of workers to go on strike, we are concerned about the devastating economic impacts this dispute will have on our industry, which is already facing significant headwinds, not to mention the impacts on forestry families and communities," said FPAC President and CEO Derek Nighbor. FPAC estimates that 10% of Canada's rail volumes come from the forest products sector.

Meanwhile, the Vancouver Sun is reporting that the head of the Port of Vancouver said the port could see increased congestion as a result of the strike. Port CEO Robin Silvester told the audience at an event at the Greater Vancouver Board of Trade that it can take weeks for the port to recover from any disruptions of volumes coming in and out of the port.

"To bring it back to the highest level, one dollar in three of Canada's trade beyond North America moves through our gateway and that is going to stop moving in the next day or so," Silvester was reported as saying.

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