The impact of Canada’s historic 17-hour railway shutdown

On Aug. 22, Canadian railways came to a halt, marking the first time both Canadian National Railway (CN) and Canadian Pacific Kansas City Railway (CPKC) locked out employees simultaneously due to stalled contract negotiations between the railways, their employees and the Teamsters Union.

While the shutdown lasted a total of four days in an on-again, off-again fashion, the impacts on the supply chain were still felt across Canada and the shipping world.

In the 10 days leading up to the lockouts and corresponding strike actions—known as the cooling-off period—over-the-road prices doubled and, in some cases, tripled compared to market rates from weeks earlier as the option for rail service dwindled. Some carriers even cancelled pre-booked shipments at regular rates to capitalize on urgent road capacity needs, a tactic that backfired once the strikes were called off.

Cargo containers sat at ports with nowhere to go, delaying berths and vessel schedules as vessel offloading wait times increased due to the backlogs.

Shipping lines discussed rejecting Canadian-bound cargo required to ship inland by rail. The embargo on reefer containers moving inland from the ports was put on hold entirely, resulting in further backlogs at Canadian ports.

CPKC implemented a timeline to try to minimize the impact on stranded cargo:

• Aug. 12: An embargo on all toxic-by-inhalation and poisonous-by-inhalation dangerous goods traffic originating in Canada or destined for a Canadian location took effect.
• Aug. 15: CPKC stopped accepting loaded intermodal shipments classified as dangerous goods at all intermodal facilities for both domestic and international shipments destined for or originating from terminals and ports in Canada.
• Aug. 17: The embargo expanded to include other dangerous goods, including all Rail Security Sensitive Materials (RSSM) and time-sensitive commodities.
• Aug. 19: The embargo expanded further to all other dangerous goods shipments.
• Aug. 20: Embargoes were extended to all shipments originating in Canada, all shipments originating in the United States destined for Canada and all carload traffic destined for Canadian interchange.

As I write this column, containers carrying my product that arrived at the Port of Montreal Aug. 20—days before the rail strike—are still moving across the country to Vancouver over 20 days later, a journey that would normally take five to 10 days on average.

Around 70 per cent of all intercity surface freight and half of Canada’s exports are moved by rail, including over 22 million tonnes of potash—accounting for 46 per cent of global exports. The question of whether rail transportation is an essential service has a clear answer: yes.

While the strike was avoided after government intervention, which is now being challenged in court by the Teamsters Union, the potential impact was enough to cause panic across the Canadian economy.

Industries that were bracing for impact included:

• The food chain: Meat processing plants were expecting to lose up to $3 million per week, which would have resulted in full plant shutdowns after one week of strike action, taking weeks to resume normal operations.
• The automotive sector: Both railways distribute automobiles and parts across Canada and the U.S. Midwest.
• Access to chemicals like chlorine for drinking water: Chlorine cannot be transported by any mode other than rail.
• Farmers approaching harvest season: Grain, legumes, canola, wheat and barley were approaching prime harvesting time, and farmers lacked the storage space to stockpile grain that could not be shipped.

Commuter trains were also heavily impacted by the strike, putting 32,000 commuters at an impasse, including passengers in Vancouver and the Greater Toronto and Hamilton Area, where the Milton Line and Hamilton GO services were temporarily suspended.

In a historic first for Canadian railways and the supply chain, the lockouts and corresponding CN and CPKC strike lasted just 17 hours before the federal government stepped in, with the Teamsters reporting that workers would return to operations Aug. 23. It was estimated that the rail stoppage cost the Canadian economy $341 million in just one day.

Labour Minister Seamus O’Regan issued a directive for binding arbitration and ordered employees to resume operations until new contracts could be reached. While this action halted a critical issue for consumers and industry alike, it raised a new question: What does this precedent mean for the future of unions’ abilities to negotiate safe conditions and fair wages?

As a result of O’Regan’s directive, the Teamsters Union, which represents nearly 10,000 workers at both CN and CPKC, is taking legal action against the federal government. Four separate appeals have been filed with Toronto courts, citing a breach of the union’s freedoms under the Charter of Rights and Freedoms.

CN, CPKC and the Teamsters met in September for the first time since the strike and lockouts occurred, marking an early phase in determining the timeline for binding arbitration.