Potential work stoppages at Canada's two largest rail companies could disrupt U.S. supply chain next week

DETROIT — Canada's two largest rail companies have begun shutting down their freight networks because of a labor dispute with a truckers' union that threatens to trigger shutdowns or strikes that would disrupt cross-border trade with the United States.

Canadian Pacific Kansas City and Canadian National, which move millions of tons of freight across the border, have stopped carrying certain shipments of hazardous materials and refrigerated products.

Both unions have threatened to lock out Canadian Truck Drivers Union workers starting Thursday if a deal is not reached.

Canadian railway operator CPKC said Saturday it would halt all shipments originating in Canada and all shipments originating from the United States and destined for Canada on Tuesday.

The Canadian Press reported that Air Canada on Friday banned the import of containers from its partner rail companies in the United States.

Jeff Windo, an industrial analyst at Edward Jones & Co., said his firm expects the shutdowns to last only a few days, but if they last longer, there could be significant disruptions to the supply chain.

“If it goes on for a longer period, I think there are some significant potential issues given the amount of freight that is handled every day. And in general, rail touches almost every sector of the economy,” Windau said.

Windau said the railways handle about 40,000 wagons of goods a day, worth about $1 billion. Shipments of finished vehicles, auto parts, chemicals, forestry products and agricultural goods will be severely affected, especially as the harvest season approaches, he added.

Both companies have extensive networks in the United States, and CPKC also serves Mexico. These operations will continue even in the event of a shutdown.

Canadian Railways said it remains committed to avoiding a disruption that would damage Canada’s economy and its international reputation. “However, we must take responsible and prudent steps to prepare for a potential disruption of rail services next week,” company spokesman Patrick Waldron said in a statement.

The Canadian Railway said the network closure would allow the railway to remove hazardous materials from its network before any shutdown.

Union spokesman Christopher Monette said in an email Saturday that negotiations were ongoing, but the situation had shifted from a potential strike to a “virtually certain” shutdown of the railroad.

Canadian Railways said negotiations were set to continue Sunday with the union, which represents about 10,000 workers at both companies. The company said it was continuing to negotiate in good faith.

Canadian National said in a statement Friday that no meaningful progress had been made in the negotiations and expressed hope that the union would “engage meaningfully” at the meeting scheduled for Saturday.

“CN wants a resolution that allows the company to get back to what it does best as a team, moving customers’ goods and the economy,” the rail company said.

Negotiations have been ongoing since last November, and the contracts expired at the end of 2023, and were extended as the talks continued.

The union said the company's demands regarding crew scheduling, rail safety and worker fatigue were the main points of contention.

Concerns about the quality of life of railroad workers dealing with grueling schedules and a lack of paid sick leave prompted a railroad strike in the United States two years ago, before Congress stepped in and blocked the strike. Major U.S. railroads have since made progress in providing paid sick leave to most railroad workers and trying to improve work schedules.

The trucking industry currently has a lot of excess capacity and may be able to offset some of the rail freight volumes, but “you won’t be able to replace all of that with trucks,” Windau said.