Canada’s supply chain and leaders grapple with rail blockades

A photograph of a train. There is snow on the ground and bare trees next to the train.

Protesters’ efforts to block freight rail traffic in Canada in support of a First Nations group’s objections over a proposed natural gas pipeline have caused ripples throughout the Commonwealth’s supply chain, including temporary layoffs at Canadian National (NYSE: CNI) and increased congestion at some ports.

Canadian National (CN) confirmed Tuesday that it has sent temporary layoff notices to about 450 employees affiliated with its eastern operations. CN shut down its eastern operations last week amid a rail blockade in Belleville, Ontario. The blockades have also disrupted service on CN’s western operations.

CN said affected employees work at the autoport in Eastern Passage and at Moncton, Charny and Montreal in accordance with the provisions of the collective agreement between CN and union employees.

“This situation is regrettable for its impact on the economy and on our railroaders as these protests are unrelated to CN’s activities, and beyond our control. Our shutdown is progressive and methodical to ensure that we are well set up for recovery, which will come when the illegal blockades end completely,” CN said.

CN told FreightWaves that it is talking with its partners and other railways to try to find ways to accommodate CN’s customers, but that it couldn’t comment on any specifics since that would entail disclosing commercial information. 

Meanwhile, the blockades are causing congestion at ports, including vessels waiting to unload at Vancouver. 

The Port of Halifax remains open, with no backlog for anchorage, and the Halifax Port Authority continues to work closely with CN and terminal operators PSA Halifax and Ceres-Halifax to minimize the impact of rail disruptions on port operations, port authority spokesperson Lane Farguson said.

“There have been no lost vessel calls as a result of the rail disruptions to date, but the longer the disruption lasts, the more difficult it will become to manage yard space,” Farguson said. 

Farguson warned that a prolonged disruption could use up yard storage space since the import cargo destined for inland markets can’t move from the terminals. If that happens, the port may be unable to accept more import cargo, and that could influence ocean carriers to stop calling at the port, Farguson said.

“Simply put, if the ships aren’t calling, cargo isn’t moving,” Farguson said. 

Meanwhile, passenger rail service provider VIA Rail said it has received notification from CN allowing service to resume in Southwestern Ontario, although trains may encounter delays.

Industries urge government intervention

The protests are in support of hereditary chiefs of the Wet’suwet’en nation who say the proposed location of Coastal GasLink’s fracked gas pipeline will bring environmental and cultural harm to their territory in British Columbia. Coastal GasLink has defended its decision.

Rail-dependent industries and other trade associations are pressing Canadian government officials to intervene and take action immediately.

The Canadian Manufacturers & Exporters (CM&E) warned that for every day that rail service is blocked, it could take three to four days for companies to make up for the lost time. The association also said if the disruptions don’t end soon, it could force manufacturers to halt production, which could result in job losses along the supply chain. 

“The federal government must work with the provinces to put an end to the blockages. For every additional day that the blockage continues, approximately $425 million of manufactured goods that are usually carried by rail are sitting idle,” CM&E Dennis Darby said. The association estimates that manufacturers loaded an average of nearly 4,500 railcars/day, or 1.62 million railcars annually, in 2016, with manufactured goods accounting for nearly half of all railcar loadings in Canada.

The Canadian Federation of Agriculture (CFA) said the rail disruptions are affecting the deliveries of food and agricultural products but also propane supplies in Eastern Canada, which farmers need to heat their barns during wintertime. This most recent disruption is the second one that farmers have faced in recent months. The first was an eight-day strike in November involving CN during peak harvest season.

“These new blockades are once again hampering the ability of farmers to get their products to port, especially those in Western Canada,” CFA said. “As farmers do not get paid until their products reach the market, this can have huge financial consequences for Canadian farmers, and creates cash-flow issues as they prepare for the coming year. As this is the second significant interruption in rail service in the past few months, these issues are compounding on each other to create an extremely challenging coming year for farmers across the country.”

Even the Canadian Trucking Alliance (CTA) called for the government to find a peaceful solution, saying that the rail disruptions can also affect the trucking industry. 

“Many trucking movements begin or end at the rail head. The supply chain is not only integrated from a supplier perspective, it’s integrated modally as well,” CTA said. “When the railways suffer disruption in service, it impacts everyone in the economy including the trucking industry. When bridges and roads are blocked, trade stops and other modes and business sectors that depend on trucking services are negatively impacted. The Canadian economy overall depends on a reliable and fully functioning supply chain.” 

Government leaders convene

Canadian Prime Minister Justin Trudeau has been meeting with other government leaders and on Feb. 18, he spoke before Parliament on the issue. Trudeau has also discussed the disruptions with British Columbia Premier John Horgan. Meanwhile, some Conservative leaders have pressed the government to take more initiative.

“It’s time to stand up for the rule of law and end these illegal blockades,” Conservative Leader Andrew Scheer said in a tweet.

According to Trudeau’s office, Canada’s Minister of Crown-Indigenous Relations Carolyn Bennett and British Columbia Minister of Indigenous Relations and Reconciliation Scott Fraser “are willing to meet with the Gitxsan Simgyget, the Wet’suwet’en Dini Ze’ and the Ts’ake ze at the earliest opportunity to engage in direct dialogue.”

On Feb. 18 Prime Minister Trudeau said in the House Chamber, “On all sides, people are upset and frustrated. I get it. It’s understandable because this is about things that matter: rights and livelihoods, the rule of law and our democracy. To those who are feeling the consequences of the blockades and the protests, I know that you are going through difficult times. Rest assured that our government is working hard to find a solution.”

First Nations leaders, including Assembly of First Nations (AFN) National Chief Perry Bellegarde, also held a news conference on Feb. 18 about the rail blockades. 

“The principles of co-existence and respect for each other is needed, and it’s not a time for divisive comments from any leader. It’s a time for calm. It’s a time for dialogue. It’s a time for coming together of our peoples,” Bellegarde said. 

“And even regarding the injunctions…the proper exercise of police discretion should not be confused with lack of enforcement,” Bellegarde added, alluding to the non-enforcement of a court injunction that calls for the Royal Canadian Mounted Police to dismantle protests on CN’s eastern network.

AFN said on Feb. 10 that the federal government needs to respect First Nations rights and the UN Declaration on the Rights of Indigenous Peoples, as well as recognize First Nations laws.
The Feb. 18 meeting at Parliament and the First Nations news conference is available on the Cable Public Affairs Channel of Canada.