A Canadian railway strike that began Aug. 22 might be coming to an end less than two days later.
Resin makers have been preparing to deal with disruptions in shipments, particularly in polyethylene and polypropylene.
Canadian National and Canadian Pacific Kansas City — Canada's two largest railroads — locked out more than 9,000 employees represented by the Teamsters Canada Rail Conference after failing to reach terms on new contracts. That lockout began at midnight on Aug. 22.
But by the end of the day, the Canadian government had ordered binding arbitration between the railroads and the union. CN reached an agreement and the government was meeting with CPKC early Aug. 23.
Steve MacKinnon, Canada's Minister of Labor, exercised his authority to direct the Canada Industrial Relations Board (CIRB) to impose final binding arbitration. CN workers were returning to their jobs and CPKC officials said their firm "is preparing to restart railway operations."
However, union officials in Ottawa said that, despite MacKinnon's action, "there is no clear indication that the CIRB will actually order an end to the labor dispute at CPKC."
CPKC officials responded by saying that at a late meeting Aug. 22, the union "refused to discuss any resumption of service, and instead indicated that they wish to make submissions to challenge the constitutionality of the Minister's direction, as well as the CIRB's discretion to proceed with any order."
CPKC "remains prepared to resume service as soon as it is ordered to do so by the CIRB," they said, adding that the railroad "is disappointed by this delay, which will affect our ability to resume serving the Canadian economy."
Officials with Montreal-based CN had said Aug. 22 that without an agreement or binding arbitration, their firm "had no choice but to finalize a safe and orderly shutdown and proceed with a lockout."
They added at the time that the union "has not shown any urgency or desire to reach a deal that is good for employees, the company and the economy."
Officials with CPKC in Calgary had added Aug. 22 that "the responsible path forward for the union, the company, our customers…and the public interest is for TCRC and CPKC to engage in binding arbitration to resolve all outstanding disputes."
In an Aug. 22 statement criticizing both railroads, union President Paul Boucher said that they "have shown themselves willing to compromise rail safety and tear families apart to earn an extra buck."
For plastics, Nova Chemicals has large amounts of polyethylene production in the Sarnia, Ontario, region, as well as at Joffre, Alberta in western Canada. Dow Inc. also has large PE assets in Fort Saskatchewan, Alberta.
Heartland Polymers also could be affected by the rail strike. In 2022, the firm opened a major polypropylene resin unit in Strathcona County, Alberta.
In a statement to Plastics News, officials with Dow in Midland, Mich., said the firm "is actively managing the impacts of the ongoing rail work stoppage."
"We have implemented our contingency plans to ensure minimal disruption to our operations and customers," they added.
Nova officials in Calgary told PN that the work stoppage "threatens supply chains and will have far-reaching effects on the petrochemical industry and beyond."
They added that Nova began preparations months ago to minimize disruption to customers, but the firm "has already begun to see impacts on our operations across Canada."
LyondellBasell's Equistar Chemicals' PE unit placed force majeure supply limits on all rail shipments to Canadian locations.
In an Aug. 22 letter to customers obtained by PN, officials said the labor disturbance and resulting inability to obtain transportation "are issues that prevent LYB's ability to perform and are beyond our reasonable control….We also anticipate potential shipment delays along the U.S. rail network."
Plastics market analyst Howard Rapport said most major resin consumers depend upon bulk railcar deliveries.
"As a major trading partner with the U.S., particularly with large volume commodity resins in PE and PP, the impact of a Canadian rail strike could certainly disrupt the flow of pellets in North America," said Rappaport, who is with StoneX in New York.
"There's room for U.S. Gulf producers to pick up some of the slack in a sustained outage," he added. "But if [the strike] persists for a prolonged period, the affected plants who rely on Canadian carriers to move resin production may have to trim back or shut down production once their inventory of empty cars is filled."
More than 11 billion pounds of PE and PP resin are exchanged between the U.S. and Canada every year, according to Esteban Sagel, principal with Chemical & Polymer Market Consultants in Houston.
U.S./Canada trade represents 21 percent of annual PE and PP production in North America, he added.
Canada exported almost 7 billion pounds of PE and more than 600 million pounds of PP to the U.S. in 2023. In the other direction, the U.S. exported more than 2 billion pounds of PE and more than 1 billion pounds of PP to Canada in 2023.
As a result, Sagel said Canadian PE and PP makers would be more impacted by a rail strike than their U.S. counterparts would.
"Unless [Canadian] producers take drastic action to curtail production, inventories will rise, putting downward pressure on prices once the strike gets resolved," he added.