Looming CP Rail lockout expected to cause more supply-chain woes and inflation

If Canadian Pacific Railway and its employees fail to come to an agreement this week, the resulting work stoppage could send shock waves through the farming and manufacturing industries at a time when the supply chain is already facing unprecedented disruptions, industry representatives say.

The result would be expected to trickle down to consumers and cause further inflation in food prices at a time when the price of some goods has already arisen due to the war in Ukraine, border blockades and pandemic delays, as well as floods and fires in British Columbia.

On Wednesday, CP Rail served the union — representing about 3,000 locomotive engineers, conductors, train and yard workers nationwide — with a 72-hour lockout notice in the wake of, until now, unsuccessful bargaining over wages, benefits, pensions and work rules.

“We’re flabbergasted by this decision,” Stephane Lacroix, Teamsters Canada director of public relations told PressProgress.

“We’ve got inflation, we’ve got what’s going on in Ukraine, we’ve got the economy of Canada recovering from the pandemic … There’s a lot of people who need the rail sector to be up and running.”

The union has said it’s willing to remain at the bargaining table until the Sunday lockout date.

The company, meanwhile, said the union rejected an offer the company tabled Tuesday and continues to make additional demands.

“We have been negotiating in good faith since September and over the past week, CP and the (teamsters) leadership have been meeting daily with federal mediators to reach a new negotiated collective agreement in hopes of avoiding labor disruption. Despite those talks, our positions remain far apart,” said CP Rail spokesperson Salem Woodrow.

The Retail Council of Canada says the timing of potential work stoppage “could not be worse” for their members. As it stands, 89 per cent of small businesses are already experiencing supply-chain challenges with retail, manufacturing and construction being the hardest-hit sectors. About three in 10 businesses are seeing their costs increase by more than 20 per cent due to supply-chain issues.

“Prices may be impacted depending on how long the lockout lasts,” says Fatma Gzara, a supply-chain expert and professor at the University of Waterloo.

“In that case, it’s not just availability but how fast the grocery industry is going to react to deal with the supply shortages. That would involve reorganization of the supply chain especially in the grocery industry.”

Grain is particularly reliant on rail transportation, so consumers could expect increases in the price of bread and flour. The industry is still recovering from a drought last summer which shrunk crop sizes by a third in Canada.

“It means that less grain is going to be able to get to our mills, which means they’ll have a lessened ability to get bread made and on the shelves. So it’s just going to exacerbate the situation that we’ve seen with inflationary food prices,” said Western Grain Elevator Association spokesperson Wade Sobkowich.

The alternative is to start to use trucking for grain, Sobkowich said, but that’s much more expensive and would also affect the consumers’ bottom line. The same is true for beef and pork products and any other livestock that eat grain.

Dennis Darby, president and CEO at Canadian Manufacturers & Exporters, used the example of how a global shortage of semiconductor chips resulted in increased price tags for cars and computer parts. His organization’s members produce everything from chemicals to heavy machinery components and pipes for pipelines.

“The results region by region are pretty consistent… anytime there’s a disruption, what happens is that costs go up,” Darby said.

Michael Graydon, CEO of Food, Health & Consumer Products of Canada said truck transportation is not an effective safety valve — that industry is facing its own challenges with the skyrocketing cost of gasoline as well as a shortage of fuel.

He suspects the biggest impact of a work stoppage would be a challenge getting products that are manufactured in Central Canada — food staples like pasta and breakfast cereals and household goods such as garbage bags — into stores in other parts of the country.

“My biggest concern quite frankly is the manufactured goods from Central Canada getting to the West because there isn’t the truck capacity to pick up the slack and quite honestly CN are pretty full,” Graydon said.

That works both ways: The Vancouver port is an important point of origin for many raw resources and materials needed for manufacturing.

“For example, coal is brought from BC to the Ajax area where there are many steel manufacturers. Interruptions to that could cause interruptions to the steel industry in Ontario,” Gzara said.

Teamsters Canada did not reply to requests for comment on the situation Thursday.

Fertilizer Canada is another organization that is watching the possible work stoppage closely. It would have major implications for them — there is expected to be a global increase in grain and fertilizer demand due to the war in Ukraine.

As a result, they are calling for the federal government to step into the arbitration process, which was echoed by Canadian Manufacturers and Exporters and the Western Grain Elevator Association.

“What we really want is the federal government to step in and to legislate back to work. We certainly respect the collective bargaining process. But in this case, when there is so much impact, not just on Canada, but the rest of the world, our federal government needs to step up and needs to act immediately,” Proud said.