Todd Lewis, a fourth generation farmer from Gray, Sask., is waiting for the CN Rail strike to end so he can ship his grain.MARK TAYLOR/The Globe and Mail
One of Canada’s biggest railway strikes in years shows no sign of pushing toward resolution as the impact from stalled trains begins to rip through several key export sectors and threatens to undermine economic growth.
A work stoppage at Canadian National Railway Co., the country’s largest freight network, went into its fourth day on Friday, paralyzing shipments of everything from oil and aluminum to grain and consumer goods. Quebec has already warned it faces a looming propane shortage as the trains sit idle. The province is rationing its remaining stocks of the fuel.
Some 3,200 CN train conductors and yard workers belonging to the Teamsters Canada Rail Conference Union walked off the job on Tuesday, demanding improvements to workplace health and safety after nine workers died in railway accidents over the past two years. The two sides are also at loggerheads on the issue of a lifetime cap on all health-related benefits.
CN says it has proposed viable solutions to specific safety concerns, but the union said on Friday “no substantive progress” has been made to address its demands. The company again called for the union to accept binding arbitration.
“I want to assure everybody that we are seized with the severity of this situation," federal Transport Minister Marc Garneau told reporters on Friday. "It is something which is having a considerable economic impact. Canadians are not only inconvenienced, but in some cases pretty stressed by this. We are encouraging both sides to keep talking.”
Pressure is mounting on the Trudeau government to legislate an end to the strike, even though Parliament is not set to reconvene until Dec. 5. Premiers in provinces dependent on the export of raw materials – notably Alberta, Saskatchewan and Quebec – have urged a resumption of service. And on Friday, grain and corn farmers hurt by a lack of propane for drying crops rolled into downtown Montreal on tractors to call for a resolution.
Mr. Garneau said the government wants an end to the conflict as quickly as possible, but he rejected suggestions that would be best accomplished by passing emergency back-to-work legislation in the House of Commons. Negotiations between the two sides with the help of federally-appointed mediators is the most probable and quickest way to resolve the dispute, he said.
“This disruption comes at a challenging time for the Canadian economy,” said Brian DePratto, senior economist at Toronto-Dominion Bank, alluding to the deceleration taking place amid global trade tensions. “More pain is hardly what the manufacturing or agriculture sectors need right now.”
CN says a small pool of qualified managers allows it to run a small number of trains during the strike. About 10 per cent of the railway’s usual service across its 22,000-kilometre network is operational, the company said Friday.
“Currently, very limited amounts of various commodities are moving across the country,” CN said in a statement. “This includes container traffic to keep Canada’s ports fluid to be able to return to normal operations after the strike.”
A senior federal government source, whose identity The Globe and Mail is keeping confidential because they were not authorized to discuss the private negotiations, said Ottawa’s view is the two sides aren’t far apart. But there is a lack of trust between them that they need to get past, the source said.
The federal Conservatives want Prime Minister Justin Trudeau to recall the House to legislate the Teamsters back to work. But Ontario Premier Doug Ford told reporters in Ottawa on Friday that wouldn’t necessarily lead to a speedy resolution.
“People think you can call [Parliament] back and get it done right away. … It doesn’t happen right away, it takes a couple weeks,” Mr. Ford said. “We need immediate results."
The Premier called the strike an “absolutely critical” issue, pointing to a bottleneck of propane in Sarnia, Ont., that is hurting farmers and people in northern parts of Ontario.
Canada’s economy could weather a short strike without much discernible damage, as businesses can use existing inventories and producers can stockpile goods over the short term and quickly make up for lost time once rail service returns. But the longer the work stoppage drags on, the more its impact will start to spill over to the country’s broader economic activity, weighing on output, consumption and exports.
Mr. DePratto estimates that if the strike were to last until Dec. 5 – likely the earliest opportunity for Ottawa to consider back-to-work legislation – the economic cost would be $2.3-billion to $3.1-billion, with a dent of 0.17 to 0.23 percentage points in fourth-quarter GDP growth. That would further erode an already weakening economy.
Rail transportation itself makes up less than 0.5 per cent of Canada’s GDP, but the sector’s interaction with many other industries means that interruptions in rail shipping can weigh more significantly on broader economic activity. For that reason, Mr. DePratto suggested that his estimated impact on GDP is likely “fairly conservative,” especially the longer the strike lasts.
The oil sector has already been hit.
Alberta had looked to rail to relieve the pressure on crimped pipeline capacity and help alleviate the differential between U.S. and Canadian prices. The province had even relaxed production limits on producers who transported their crude to market via rail.
The CN strike has thrown a wrench into those plans, forcing more product into storage and further constraining the market, said Kent Fellows, an economist at the University of Calgary’s School of Public Policy.
CN carries 170,000 barrels of oil per day to market. With limited pipeline capacity, that oil now has nowhere to go. That has producers making alternate plans, like increasing the amount they ship via Canadian Pacific Railway Ltd., or even, some analysts suspect, considering trucking their crude to market.
Regardless, Dr. Fellows said, the reality is that every day the strike continues makes things marginally worse for the sector, with more oil going into storage, which then increases storage costs. When the strike does end, crude will have to compete with other products to get back on the rails.
“Crude doesn’t last forever, but if you’re looking at priorities, some of those agricultural products, for example, will need to get to market more quickly, because it will spoil faster than oil does,” Dr. Fellows said.
In the meantime, some companies with conventional wells will likely consider scaling back production to avoid storage costs and wrestling their crude onto limited rail and pipeline service. Dr. Fellows said that could mean the number of rigs will drop.
In Saskatchewan, farmers were already facing a tough harvest season even before the rail strike disrupted the crucial November shipping window. A dry spring, a rain-soaked fall, and early snow meant that an unusually high proportion of grain crops are still not harvested – 7 per cent, or as many as 3 million acres, according to the Agriculture Ministry. The crops that could be harvested needed to be dried, driving up costs for farmers and delaying shipping.
Then came the strike, especially damaging to the northern part of the province, where a CN line is the only rail option in many places. Every day of the shutdown means major disruptions to the tightly choreographed schedule of shipping the fall harvest to Pacific and Great Lakes ports and to processing plants. The province’s mining and energy sectors are also at risk, with rail shipments of potash and refined petroleum products disrupted.
Saskatchewan Premier Scott Moe is calling for the company and the union to move immediately to binding arbitration; failing that, Mr. Moe said he would want the Liberals to call back Parliament early and introduce back-to-work legislation.
In the meantime, the damage to the provincial economy will quickly mount as grain elevators fill up and farmers have to hold onto their harvest. “You are going to see the impact of that in the agriculture industry for weeks, likely months, to come as grain shipments back up,” Mr. Moe told reporters on Thursday.
Not all farmers are equally affected. Some, like Chris Gislason in Foam Lake, got their early grain shipments delivered to elevators before the strike. But Mr. Gislason is still worried that the ripple effects of strike will delay his second shipment, scheduled for January.
The CN job action has erupted in the peak time for shipping grain, said Todd Lewis, president of the Agricultural Producers Association of Saskatchewan, who as a grain farmer is experiencing first-hand the economic pain of the strike. After the first few days of December, winter weather will slow down shipments through the Rockies; grain deliveries through Thunder Bay’s port will stop until spring, Mr. Lewis said. “We’re losing shipping days. We won’t get those back.”
The metals and mining industry is also being walloped.
The Mining Association of Canada said in a statement earlier this week the strike will have a “seriously harmful effect,” on not only the transport of minerals out of mines, but the shipment of fuel and other supplies into facilities. According to the trade group, the industry accounted for more than half of freight revenues for Canada’s major railways last year, and was the largest shipping group by volume.
The association said its members have warned that the strike will lead to mine closings and trigger the layoff of thousands of workers within days. The mining industry employs 626,000 people in Canada.
Credit Suisse AG analyst Fahad Tariq said the Canadian gold industry will be largely unaffected by the strike, as the metal is predominantly shipped by truck. But companies that produce base metals like nickel and copper will suffer, as those minerals are typically shipped by rail in concentrate form.
Toronto-based Hudbay Minerals Inc., which has two large base metals mines in Manitoba, will take a hit in the short term, according to Mr. Tariq. CN is the top mover of aluminum, iron ore and base metal ore in North America, and serves 10 aluminum smelters, according to its website. Most of those smelters are in Quebec.
Vancouver-based Teck Resources Ltd., Canada’s biggest base metals company, will also have to alter its transportation plans. According to a regulatory filing earlier this year, metallurgical coal from its Cardinal River mine in Alberta is carried on CN trains to the west coast.
Teck spokesperson Chris Stannell wrote in an e-mail to The Globe that the company is “implementing mitigation strategies,” but did not provide specifics.
The House of Commons is scheduled to sit for seven days, from Dec. 5 to Dec. 13, before rising for the Christmas holidays. That first day back will be taken up with electing a Speaker, followed by a Throne Speech.
During a similar seven-day period after the 2015 election, the House focused on debating the Throne Speech and approving routine spending items.
Should a back-to-work order be required, the minority Liberal government would need the support of at least one other party to move the bill quickly into law. NDP Leader Jagmeet Singh said this week that he would oppose back-to-work legislation and would not support any procedural moves that will allow such a bill to be dealt with quickly.
The last time Parliament approved back-to-work legislation was in November, 2018, to end a labour dispute at Canada Post.
The NDP opposed that bill, but the Liberal majority passed the legislation through all stages in less than a week. The process took two sitting days in the House and two in the Senate, including a rare Saturday sitting.
With reports from Marieke Walsh, Bill Curry and David Parkinson