Factbox: Canadian rail stoppage set to squeeze North American industries
21/08/2024 21:55
(Adds comment from ratings agency Moody's in paragraph 4; farm
impact details in paragraphs 18-19)
Aug 21 (Reuters) - Canada's freight rail transport could
come to a grinding halt as the country's two biggest railroad
operators plan an unprecedented, simultaneous work stoppage
following deadlocked talks over labor contracts.
Both Canadian National Railway CNR.TO and Canadian Pacific
Kansas City CP.TO will lock out workers on Thursday if
last-minute talks with the Teamsters Union fail to avert a
costly stoppage.
Canada, the world's second-largest country by area, relies
heavily on rails to transport grain, automobiles, potash, coal
and other goods. The railways transport about C$380 billion
($277 billion) worth of goods and commodities annually, and the
impact of the rail stoppage is expected to be felt across North
America.
Rating agency Moody's estimates the simultaneous stoppage
could cost the Canadian economy C$341 million per day.
Here are some sectors set to be damaged by a potential rail
stoppage:
FERTILIZERS
* Fertilizers account for the third-highest volume among
commodities shipped by Canadian railways, and 75% of all
fertilizer produced and used in the country is moved by rail.
* The railways move an average of 69,000 metric tons of
fertilizer product per day, equivalent to four to five trains
daily.
* Fertilizer Canada, which represents producers such as CF
Industries CF.N and Nutrien NTR.TO , has estimated C$55
million to C$63 million per day in lost sales revenue from
disruptions of all rail services.
* Top potash producer Nutrien said the potential stoppage could
hamper its full-year potash sales.
TRUCKING
* About 85% of U.S.-Canada cross-border freight in either
direction is primarily handled by Canadian trucking carriers.
* Truckers say they can absorb some of the increased demand, but
cannot replace long-haul rail distribution, especially for bulk
commodities such as coal, potash and food grains.
* Truckload shippers with spot freight, as well as rail shippers
looking to convert to truck, should expect not only higher costs
but also longer lead times, says U.S. freight forwarder C.H.
Robinson CHRW.O .
COAL
* Coal is one of Canada's top bulk commodities transported by
rail, with over 30 million metric tons moved annually, according
to the Coal Association of Canada.
* Shipment disruptions could affect mining giant Glencore
GLEN.L and its majority-owned unit, Elk Valley Resources.
CRUDE OIL
* An average of 94,400 barrels per day of crude oil has been
exported via rails this year, according to the Canada Energy
Regulator.
* The strike is, however, unlikely to significantly reduce oil
exports to the United States, due to excess capacity on Trans
Mountain and other pipelines.
GRAINS AND AGRI PRODUCTS
* Canadian farmers rely on the railways to move their products
to the market. As much as 94% of grain is shipped by rail,
according to Grain Growers of Canada.
* A stoppage would crimp shipments of U.S. spring wheat from
Minnesota, North Dakota and South Dakota to the Pacific
Northwest for export.
* Nearly three dozen North American agriculture groups warn a
simultaneous stoppage would be particularly severe on bulk
commodity exporters in both Canada and the United States.
TIMBER
* With exports worth C$45.5 billion in 2022, as per Canadian
government data, the forest sector is an important contributor
to the country's economy.
* Pulp producer Mercer International MERC.O said it was
working on contingency plans including alternative transport
methods in anticipation of a rail stoppage, while Conifex Timber
CFF.TO is reducing its sawmill operating schedule at its
Mackenzie, British Columbia site
* Canadian National Railway is North America's largest rail
carrier of forest products, according to its website.
AUTOS
* The U.S. imported and exported transportation equipment worth
about $73 billion respectively in 2023 from Canada, according to
the International Trade Administration.
* Canadian National's website said it handles over 2 million
finished vehicles on an annual basis, catering to over 12 North
American vehicle assembly plants.
* Canadian Pacific Kansas City caters to about 90% of automotive
assembly plants in Mexico, it said on its website.
WINE INDUSTRY
* Canada exported 219.78 kilolitres of wine in 2023 and imported
407.38 kilolitres, per government data.
* Ontario Craft Wineries, a local trade association, said a rail
stoppage could apply supply-chain pressure on several inputs
such as glass bottles, corks, and barrels and affect its
members' ability to export wines to other countries or slow down
the rate of imported bulk wine into Canada.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Exports of Canadian forest products https://reut.rs/3yAvpUh
EXPLAINER-Why a Canadian freight rail halt would roil North
American supply chains urn:newsml:reuters.com:*:nL1N3K80V9
FACTBOX-Key facts about Canada's biggest rail operators as
massive work stoppage looms urn:newsml:reuters.com:*:nL4N3K403C
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(Reporting by Mrinalika Roy and Nathan Gomes in Bengaluru;
Editing by Sriraj Kalluvila and Rod Nickel)
((mrinalika.roy@thomsonreuters.com;))