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Losing $1 Billion Per Day
Canada's railway labor dispute and the risks to commodity markets and U.S. economic activity
Mobius Intel Brief:
Canada’s two largest railways shut down on Thursday as Teamsters Canada Rail Conference members were locked out after failed contract negotiations with Canadian National Railway Co. (CN) and Canadian Pacific Kansas City (CPKC).
The two railways control approximately 80% of Canadian rail lines, with the labor dispute compromising approximately 900,000 metric tons of daily trade worth between $740 million and $1 billion.
Extended disruptions to Canadian rail shipments to the U.S. welcome material consequences for several sectors. While automotive exports are well-covered in the media spotlight, commodity markets are poised to face repercussions from reduced shipments of Canadian fertilizer, grains, biomass-based fuel feedstocks, and coal.
Canada’s labor dispute comes at an inopportune time for the U.S. economy, as supply chain price pressures remain a potent upstream risk for sticky inflation and accelerated labor market deterioration.
These supply chain risks are evident in Thursday’s S&P Global Flash Manufacturing PMI and ISM’s similar print from early August. Trends and follow-on consequences for stakeholders to monitor are outlined below.