Canada chems relieved as trains run again, may take weeks for supply chains to normalize

TORONTO (ICIS)–Canada’s chemical industry is relieved that freight trains are running again following a four-day shutdown, officials said on Tuesday.

Freight rail service at railroads Canadian National (CN) and Canadian Pacific Kansas City (CPKC) resumed on Monday, 26 August, following an order by a labor tribunal that ended a complete shutdown that started on 22 August.

A prolonged rail disruption would have had “devastating impacts on Canadians and the broader economy,” said Greg Moffatt, executive vice president of trade group Chemistry Industry Association of Canada (CIAC).

Canada’s chemical industry moves more than 500 railcars of product each day, he noted.

CIAC’s immediate concern was for the rail shipment of chlorine to municipalities, for the treatment of drinking water. Both railroads had stopped accepting chlorine and other hazardous materials before the 22 August shutdown.

Meanwhile, other chemicals manufactured in Canada are “essential building blocks” for the agriculture, agri-food, pharmaceuticals, manufacturing, construction, automotive, mining and forestry sectors in both Canada and the US, Moffatt said.

COULD TAKE WEEKS FOR SUPPLY CHAINS TO NORMALIZE
John Corey, president of the Freight Management Association of Canada, said it could take four weeks or more before supply chains get back to normal.

The government should have intervened much earlier to prevent the shutdown, as the parties had been negotiating new collective deals since November last year, without success, he said.

Although some commentators have suggested that freight rail was an essential service and the best way to prevent future shutdowns was to nationalize the railroads, Corey said that was not a solution.

North American railroads used to be government-controlled or owned in the last century, but they became inefficient “dinosaurs” and had to be deregulated, Corey said.

He pointed to the 1980 Staggers Act in the US and the 1995 privatization of CN in Canada.

“Nationalization is the worst possible solution” to prevent future labor-related disruptions, he said, adding, “The government does not run many things well, as we know.”

He noted that Canada was facing a further threat to its supply chains because of new labor issues at its ports. Last year, a 13-day strike shut down Canada’s West Coast ports.

Canada-based chemical producers rely on rail to ship more than 70% of their products, with some exclusively using rail.

About 80% of Canada’s chemical production goes into export, with about 80% of those exports going to the US, according to CIAC.

(Map by Miguel Rodriguez Fernandez)

The following table by the American Association of Railroads (AAR) shows Canadian freight rail traffic, including chemicals, for the week ended 17 August and the first 33 weeks of 2024:

Thumbnail photo source: CN