Canada Faces Major Freight Rail Stoppage

OTTAWA (Reuters) – Canada is experiencing an unprecedented simultaneous stoppage at its two main freight rail operators, which could lead to billions of dollars in economic damage.

Both Canadian National Railway (TSX:CNR) and Canadian Pacific (NYSE:CP) Kansas City are in separate negotiations with the Teamsters’ union, representing more than 9,000 workers such as locomotive engineers, conductors, and rail traffic controllers.

The companies locked out workers after failing to finalize a labor deal on Thursday.

Historical Background

CN Rail, officially incorporated in 1919, has a history dating back to the 1830s. Headquartered in Montreal, CN was government-owned until it was privatized in 1995. The company acquired Illinois Central Corp and Wisconsin Central in the late 1990s and expanded its network across the Great Lakes to the Gulf of Mexico.

CPKC has roots in the 1880s; previously known as CP Rail, it aimed to connect Canada coast-to-coast. CP Rail once ventured into various businesses, owning iconic properties like the Banff Springs Hotel. In 2001, CP Rail spun-out its other businesses and in 2021, acquired Kansas City Southern Railway, becoming CPKC, the first single-line rail connecting the U.S., Mexico, and Canada.

Rail Networks

CN Rail and CPKC operate as a duopoly and are the dominant freight rail operators in Canada. They account for most rail transport revenues and own over 75% of the country’s tracks, carrying roughly three-quarters of the rail sector’s tonnage. Their networks are crucial for supply chains across North America.

CN Rail, with 25,000 employees, stretches from Vancouver to Halifax and down to New Orleans. CPKC employs around 20,000 and operates from Vancouver to Montreal, linking to various ports in the U.S. and Mexico.

Revenue Mix

In 2023, CN Rail’s freight revenue breakdown included 25% from grain, fertilizers, and coal, while 24% came from metals, minerals, and forest products. The rest came from petroleum products and intermodal cargoes.

For CPKC, 35% of revenue derived from coal, grain, and fertilizers, while forest products and energy constituted 45% of its revenue stream.

Prior Work Stoppages

Past strikes include an 8-day strike by 3,200 CN Rail workers in 2019 that caused fuel shortages and industrial slowdowns. A day-long CP Rail strike in 2018 ended with a four-year contract, while a 2012 CP Rail strike involved 4,800 workers and resolved through government intervention due to economic recovery concerns.