By Canadian Press

Companies take stock of rail shutdown’s hit to economy – and bottom lines

Aug 25, 2024 | 9:25 AM

MONTREAL — The economic fallout of the country’s rail shutdown is set to come into focus this week as shippers and producers take stock of cargo delays and financial losses.

A work stoppage that began early Thursday morning at Canada’s two major railways is slated to end first thing Monday after a decision from the federal labour board ordered the companies and their workers to resume operations.

But the full financial impact of the shutdown remains unclear, even as Moody’s warned it could cost the Canadian economy $341 million per day.

The credit rating agency said agriculture, forestry and manufacturing were among the hardest-hit sectors.

The stoppage is poised to last only four days, but it marks the culmination of a phased wind-down at both railways that will have spanned roughly two weeks.

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Saturday’s decision from the Canada Industrial Relations Board imposes binding arbitration on all involved parties following an unprecedented dual work stoppage at Canadian National Railway Co. and Canadian Pacific Kansas City Ltd. that halted freight shipments and snarled commutes across the country.

The board’s decision dropped two days after Labour Minister Steven MacKinnon directed the arm’s-length tribunal to begin the arbitration process, saying the parties were at an impasse in contract talks and Canadian businesses and trade relationships were at stake.

The Teamsters union has vowed to appeal the ruling in court.

Ulrich Paschen, a business instructor at British Columbia’s Kwantlen Polytechnic University, suggested the four-day shutdown fell short of a drawn-out shipping paralysis which could have wreaked havoc on supply chains and caused shortages and price hikes.

“We’ve seen what happens if you remove too many puzzle pieces from that supply chain puzzle,” he said.

Last summer’s 13-day strike by 7,400 B.C. dockworkers blocked the flow of $500 million worth of goods each day, according to industry group Canadian Manufacturers and Exporters.

“The kind of disruption that we had back in July (2023), it took us multiple months to clear out,” said Victor Pang , chief financial officer at the Vancouver Fraser Port Authority, in a recent interview.

The port had already asked cargo ships to slow their arrival to avoid congesting the terminals.

Canadian Pacific said a full recovery will likely take several weeks. The company lifted its lockout after the labour board’s decision Saturday evening, but employees declined CPKC’s request to return to work for Sunday. Their strike will cease at 12 a.m. Monday, in line with the tribunal’s ruling.

CN, whose workers issued a 72-hour strike notice Friday after the company lifted its own lockout the day before, are already back on the job to carry out the complicated process of revving up operations across 32,000 kilometres of track.

This report by The Canadian Press was first published Aug. 25, 2024.

Companies in this story: (TSX:CP, TSX:CNR)

Christopher Reynolds, The Canadian Press