CN and CPKC have locked out their employees since 12:01 a.m. Thursday. The bulk industries are the hardest hit. Canada is a major producer of grains, potash and metallurgical coal. In general, these industries have no reasonable way to get their products to market without the railroad, which largely means transporting them to ports for export. Other affected industries that are transported by rail car include automotive, forest products, chemicals and petroleum. Grain producers could be the worst hit because their storage capacity is limited and the timing is late summer/early fall, as shown below.
The work stoppage comes at an inopportune time for Canadian grain producers, as the volume they transport by rail increases seasonally in early September. (SONAR: RTOGR.CAN)
In addition to railcar traffic, rail intermodal volumes in Canada are also negatively impacted by the lockout. While truckload is often a viable substitute for rail intermodal on many routes, the modes are generally less interchangeable in Canada. Canadian intermodal traffic is much more skewed toward international intermodal (primarily the movement of 40-foot sea containers) than domestic intermodal (which uses domestic equipment and could be more easily rerouted by a multimodal intermodal provider). SONAR data shows that the international-to-domestic ratio in Canada is about 70/30, compared to about 45/55 in the U.S. Additionally, haul lengths are longer in Canadian intermodal. Major routes include Vancouver, British Columbia, to Toronto and Prince Rupert, British Columbia, to Chicago. In short, in Canada, truckload has a harder time bridging the gap.
Below are some areas to observe in the SONAR data as the lockout progresses:
Vancouver
Vancouver is Canada’s largest port and largest intermodal departure point. SONAR data shows that about 90% of Vancouver’s outbound volume is international intermodal, and Toronto is the largest destination, accounting for about half of the total Vancouver outbound intermodal unit volume.
The number of intermodal waybills created for the Vancouver-Toronto route as origin and destination has jumped in recent days, probably as a rush before a possible work stoppage. (Chart: SONAR – ORAIL.VANTOR)
Prince Rupert
Rail traffic out of Prince Rupert has been weak since early July (see SONAR chart below). At their recent earnings calls, Canadian National (CN) and Union Pacific management teams said ships were being diverted from Canada to U.S. West Coast ports. CN singled out Prince Rupert as the hardest hit Canadian port. Unlike most port cities, Prince Rupert has virtually no local consumption and is not a viable trucking market due to its remoteness, so a lack of rail connections would leave containers stuck in no man’s land. Container imports into Prince Rupert are also largely destined for U.S. consumption centers such as Chicago, making volumes more vulnerable to diversion to U.S. West Coast ports.
Prince Rupert had to expect ships to be diverted in anticipation of a work stoppage. Map: SONAR – ORAIL.PRG.
Cross-border
Before the work stoppage, an embargo had been imposed on cross-border shipments, including shipments from ports in the northeastern United States destined for cities in eastern Canada.
Cross-border container intermodal units from Canada to the US and from the US to Canada are shown in white and purple, respectively. (Chart: SONAR – ORAIL.CANUSA, ORAIL.USACAN)
Container transport by rail from Newark, New Jersey to Toronto. (Diagram: SONAR – ORAIL.EWRTOR)
West Coast of the USA
U.S. West Coast ports and Class I railroads are seeing higher volume due to vessel rerouting. This positive volume effect can negatively impact service if it places too much strain on intermodal networks and equipment availability. Accordingly, Union Pacific issued a customer service alert on Wednesday, explaining that Southern California is a constrained market for domestic container capacity, putting pressure on EMP and UMAX container fleets, and that surcharges of $300 to $500 per shipment would be imposed.
Due to ship diversions, international intermodal volume from LA (which includes Long Beach) has increased sharply in recent days. (Chart: SONAR – ORAILINTL.LAX)
