As Canada braces for rail stoppage, truckers scramble to meet demand

CH Robinson Worldwide

20/08/2024 21:38

* 
      Canadian National Railway and Canadian Pacific Kansas City
plan
to halt operations on Thursday
    

        * 
      Trucking sector sees increased demand it struggles to meet
    

        * 
      85% of U.S.-Canada cross-border road freight handled by
Canadian
carriers
    

        * 
      Higher trucking demand leads to rising costs and longer
lead
times
    

        * 
      CN and CPKC begin phased network shutdowns
    

  
    By Anna Mehler Paperny and Nivedita Balu
       TORONTO, Aug 20 (Reuters) - As Canada braced for a
freight rail stoppage that could hit industries ranging from
autos to agriculture, the trucking sector said it faced higher
demand it could not meet.
Unless labor agreements are reached, Canadian National Railway
 CNR.TO  and Canadian Pacific Kansas City  CP.TO  - which hold a
duopoly - plan to indefinitely halt operations on Thursday at
the same time, marking a first.
Canada relies heavily on railways to transport goods and
commodities, but trains are already winding down in anticipation
of a strike or lockout.
Daman Grewal, a senior operations manager with British
Columbia-based Centurion Trucking, would normally expect 20 or
30 online postings from shippers seeking trips east across
Canada on an August Monday. On Monday morning, he saw more than
500.
"Last week is when a lot of the panic started to set in," said
Grewal, noting trips for which he charged C$7,000 ($5,139) a few
days ago now cost up to C$9,000. "Similar to COVID, you see the
scarcity in supply chain."
Grewal said Centurion could increase capacity 10% to 20%,
largely by reducing driver downtime.
"We would just have to turn the drivers around a little bit
quicker," he said. 
    Industry officials said some softening in the economy has
left room to increase capacity but not enough to make up for
idled railways.
Some rail shippers have been trying to book additional truck
capacity since February ahead of a disruption, said Alberta
Motor Transport Association president Robert Harper. 
    "The industry can help out in the short term in reallocating
assets, but in the long term you simply cannot replace long-haul
rail distribution. Because in some cases, the industry doesn't
have the equipment nor the capacity," Harper said.
     
    NO PLAN B
    U.S. freight forwarder C.H. Robinson  CHRW.O  estimates 85%
of U.S.-Canada cross-border road freight in either direction is
handled by Canadian trucking carriers.
    "Anytime you have an event that causes a surge in trucking
demand and sudden tightening of capacity, costs in the spot
market can increase dramatically. In the past, we've seen rates
in Canada double overnight," said C.H. Robinson's vice president
for Canada Scott Shannon, adding this will result in not just
higher costs, but also longer lead times.    
CN and CPKC have begun phased shutdowns of their networks ahead
of the looming stoppage. 
    The severity of the disruption, should it occur, will be a
factor of how long it lasts, said Joseph Towers, a senior rail
analyst at FTR Transportation Intelligence.
    Canada's federal government may have no choice but to step
in to end a stoppage that could cripple industries, said Western
University supply chain expert Fraser Johnson.
    "There is no Plan B for any of these industries because it's
not practical to substitute trucks for established supply chains
that use rail. ... You can't snap your fingers and increase your
capacity in terms of trucking."
    
    ($1 = 1.3620 Canadian dollars)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EXPLAINER-Why Canada is on the verge of an unprecedented rail
labor stoppage     ID:nL1N3K60NG 
FACTBOX-Key facts about Canada's biggest rail operators as
massive work stoppage looms     ID:nL4N3K403C 
QUOTES-Industry groups and companies fret ahead of a Canada-wide
freight rail stoppage     ID:nL4N3K6190 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Anna Mehler Paperny, additional reporting by
Promit Mukherjee; Editing by Rod Nickel)
 ((mailto:Anna.MehlerPaperny@thomsonreuters.com; 647-225-9609;))