Overview
- Canada’s major railroads Canadian National and Canadian Pacific Kansas City resumed labor after a forced binding arbitration; operations have not fully returned to normal levels.
- Teamsters have filed an appeal of the forced stoppage and tensions remain high, potentially resulting less efficient work.
- Origin railyard dwell saw a 44% increase despite working resuming.
- Destination railyard dwell has decreased by 80%, likely due to lower volumes. As backlogged freight continues to arrive at its destination, destination railyards could start seeing congestion, causing an increase in dwell.
- Rail transit times have returned to normal levels after a spike when the strike started.
- Full truckload performance levels remain unimpacted by the strike and recovery.
Canadian National Rail Line and Canadian Pacific Kansas City
Ongoing disputes over safety, scheduling practices, and relocation notices between the Teamsters and rail operators have escalated. On August 22nd, Canadian National Rail Line (CN) and Canadian Pacific Kansas City (CPKC) locked out workers. These two companies account for an estimated 90-95% of all rail shipments in Canada, meaning disruptions can have widespread effects on supply chains across North America. The industries most impacted include mining, forestry, agriculture, automotive, consumer goods, and manufacturing, though the effects are expected to be far-reaching.
Due to the scope of the strike, the Canada Industrial Relations Board and Labor Minister Steven MacKinnon ordered operations to resume and imposed binding arbitration between the Teamsters and the railway companies. The Teamsters have since filed an appeal in federal court contesting the forced stoppage, but in the interim, they have agreed to return to work. As of August 26th, both railroads are operational, though tensions remain high between the union and the companies, and service levels have yet to return to pre-strike efficiency. project44 will continue monitoring key rail metrics in Canada.
Rail Metrics
Origin Yard Dwell
The chart below shows the average time, in hours, that freight is waiting at its origin rail yard.
Typically, average wait times fluctuate between a day and a half. However, since the strike, dwell time at origin yards has consistently increased, reaching a recent high of over two days during the week of August 26th—a 44% increase. This spike likely reflects the effort to clear out backlogs from the labor stoppage. It is possible that dwell time will continue rising as containers impacted by the stoppage are loaded onto trains.
Destination Yard Dwell
The chart below shows the average time, in hours, that freight is waiting at its destination rail yard.
Average wait times at destination yards normally range from one to two and a half days. However, since the strike, these times have dropped by nearly 80%, likely due to the decreased volume of shipments arriving in recent weeks. With fewer shipments to handle, more appointments have become available, allowing for faster turnaround times.
As shipment volumes increase, it’s possible that congestion at destination rail yards will return, pushing dwell times back up.
Rail Transit Times
The chart below shows the average transit time for rail shipments to reach their destination.
After an initial rise in transit time following the strike, this metric has since leveled off. In the past two weeks, transit time has decreased by 23%, aligning with pre-strike averages.
Full Truckload On-Time Performance
The chart below shows on-time performance for truckload shipments picked up or delivered to Canada. Despite the rail workers’ strike, increased demand for truckload services has not led to a significant drop in performance.
Truckload performance has remained steady and is not expected to experience major impacts due to rail disruptions.
Industries Most Susceptible to Impacts
Although the strikes have ended, there are lingering tensions between labor and railroads. This could result in slow downs and less efficient work. The following industries are most susceptible to interruptions in rail services.
Crude Oil and Petroleum Products
Crude oil is a key product transported by rail, especially from landlocked regions like Alberta, where pipelines may not reach. Each rail car can carry about 700 barrels of oil, equivalent to the capacity of several tanker trucks. Refined petroleum products such as gasoline and diesel also rely on rail for efficient distribution to markets. With the rail strike, oil producers will face challenges moving large volumes, leading to increased reliance on trucking, which is less efficient and more costly. This could cause supply chain disruptions and potential price hikes in energy markets.
Minerals and Metals
Canada’s vast mineral resources, including coal, iron ore, and potash, are primarily moved by rail due to their heavy weight and bulk. A single rail car can carry around 100 tons of iron ore or coal, making rail transport far more efficient than trucking. Rail disruptions will force mining companies to find alternative, more expensive transportation methods, such as trucks, which cannot match the volume and efficiency of rail. This shift will increase shipping costs, potentially affecting global supply chains, especially in steel production and agriculture, where these materials are essential.
Lumber and Forestry Products
Lumber and other forestry products like logs and pulpwood are traditionally transported by rail because of their large volume and bulk. Rail cars can carry a significant amount of timber, which would require multiple trucks to match. The rail strike means that forestry companies will need to shift to less efficient methods like trucking, leading to higher transportation costs and potential delays. This could impact industries dependent on these materials, such as construction and paper manufacturing, by driving up prices and causing supply shortages.
Automobiles and Parts
The automotive industry heavily relies on rail to transport finished vehicles from manufacturing plants to dealerships across North America. Each rail car can hold multiple vehicles, making rail transport far more efficient than using individual trucks. In addition to finished vehicles, rail is also used to move large volumes of automotive parts necessary for assembly. The rail strike will disrupt these supply chains, forcing manufacturers and distributors to depend on less efficient shipping methods like trucking, leading to increased costs, potential production slowdowns, and delays in vehicle availability.
Intermodal Containers
Intermodal containers, which carry a wide variety of goods ranging from electronics to clothing, are typically shipped by rail due to the efficiency of moving large volumes over long distances. Rail transport allows for containers to be stacked and moved in bulk, something that would require many trucks to achieve the same capacity. With peak season just around the corner, the rail strike will necessitate a shift to truck transport to ensure timely delivery, increasing costs and still causing potential delays in the delivery of consumer goods. Retailers and manufacturers could face disruptions in their supply chains, leading to shortages and higher prices for consumers. As Black Friday, Cyber Monday, and other holiday shopping deals approach, the increased costs in transportation could cause retailers to limit the amount of deep discounts given in order to recoup the loss.
Summary
In summary, the recent labor disputes between Canadian National Rail Line and Canadian Pacific Kansas City have significantly disrupted rail operations, causing ripple effects across several key industries in Canada and North America. While operations have resumed after a brief strike, tensions between the unions and rail companies persist, affecting service levels. Critical industries such as oil, minerals, lumber, automotive, and intermodal freight remain particularly vulnerable to ongoing inefficiencies. As shipping volumes recover, both rail and alternate transport methods, like trucking, face increased pressure, potentially leading to higher costs and supply chain disruptions, especially as peak consumer shopping seasons approach.
