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‘Hell on wheels’: CP rail shutdown brings more pain to supply chain

Two days after Canadian Pacific Railway shut down its rail network amid a labor dispute with more than 3,000 of its Teamsters-represented employees, the impacts to the supply chain are just getting started.

The loss of Canada’s second-largest freight rail operator has stalled shipments of everything from grain to containers full of electronics headed to cities across Canada and the U.S. And it will soon inevitably bring backups to ports, including Vancouver, British Columbia, and Montreal.

“This is hell on wheels,” said Manny Calandrino, president and CEO of Consolidated Fastfrate, a Toronto-area-based LTL carrier that has long-standing partnership with CP and is co-located at its intermodal facilities in Canada.

As of Monday evening, CP and Teamsters Canada Rail Conference remained in talks with federal mediators. Engineers, conductors and yard workers picketed outside CP rail facilities across Canada.

Apart from the underlying contract dispute over pay and pensions, the two sides are also at odds over whether CP locked out the 3,000 workers or the union began a strike early Sunday.

CP and Teamsters Canada declined to comment on the impacts of the rail network shut down. A spokesperson for CP said the company “remains at the table.”

‘A landlocked and bottlenecked supply chain’ in the making

In Canada, CP’s rail network stretches from Vancouver to Montreal, and in the U.S. it reaches key U.S. markets including Chicago, New York and Minneapolis. The railroad also provides an essential link to the ports of Vancouver and Montreal — Canada’s busiest — through on-dock access.

Both the Vancouver and Montreal port authorities said they are continuing to monitor the situation.

The consequences of disrupting those rail links with the ports can quickly cascade into something larger. In December, landslides cut off CN and CP’s main lines serving Vancouver. At one point 60 ships were waiting to dock in Vancouver as a result.

While just CP is affected, the current disruption is playing out over a much wider swath of the supply chain. And there are simply no relief valves.

“You only have a matter of days, if not hours, before you have a landlocked and bottlenecked supply chain on top of everything else that has been contributing to the quagmire over the past several years,” said Julia Kuzeljevich, spokesperson for the Canadian International Freight Forwarders Association.

Calandrino said his customers are left with few options, since there’s little capacity on CN’s rails. Some are willing to pay rates of four to five times those of rail to have freight moved by truck, which Fastfrate contracts out. But many aren’t.

“They’re going to try holding it for a bit on their own, in their own warehouses, and not ship until this is over,” he said. “But that leads to more delays.”

The shutdown adds to a long list of disruptions. There was the blockade of the busiest commercial border between the Ambassador Bridge in February, the landslides in British Columbia in December and the Montreal port strike in April.

“We really didn’t need this one,” Calandrino said.

Feds could turn to back-to-work legislation

Before COVID, in November 2019, CN rail workers went on a weeklong strike. In that case, CN and the Teamsters Canada Rail Conference reached an agreement.

But it’s not clear what will happen this time. There have already been calls from multiple industry groups to legislate the CP workers back to work.

Canadian labor law expert Sara Slinn, a professor at Osgoode Hall Law School at York University, said there is a “very good likelihood that the government will entertain back-to-work legislation” because of the ongoing strains in the supply chain, and fears over commodity shortages because of the war in Ukraine.

“Supply chain disruptions and price problems and inflation and scarcity have been the forefront of the news for a long, long time and really blew up with those more recent events,” she said.

For now, Prime Minister Justin Trudeau’s minister of labor, Seamus O’Regan, is continuing to urge CP and the Teamsters to hash things out.

“We have faith in their ability to reach an agreement,” O’Regan said in a statement. “Canadians expect them to do that ASAP.”

Credit American Shipper by Nate Tabak

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