Canada’s two primary rail companies, which hauled about 300,000 carloads of petrochemicals in the first quarter of 2024, face a strike that could shut down the country’s rail system in May.

Canadian Pacific Kansas City (CP) and Canadian National Railway (CNI) are at an impasse with the Teamsters Canadian Rail Conference (TCRC), a union that represents more than 9,000 engineers and conductors at the two companies.

Union members have been voting on whether to authorize a strike. The vote closes May 1, followed by a government-mandated 21-day cooling down period. If a deal is not negotiated in that timeframe, a strike would begin at midnight on May 22.

Both railway companies carry a large amount of petrochemical freight from Canada into the U.S. CPKC, after a 2023 merger between the former CP and KCS, became the only rail company with a network from Canada to Mexico.

According to CPKC’s earnings press release, the company saw CA$702 million (US$512 million) in revenue from its “energy, chemicals and plastics” segment in the first quarter of 2024, a 92% increase over the same period last year, though much of the increase came from the larger rail network acquired through the earlier merger.

CPKC’s petrochemical freight revenue is second only to money earned from grain shipments.

CN categorizes its petroleum, gas and NGL freight differently.

CN saw CA$857 million (US$626 million) in revenue from hauling in the “petroleum and chemicals” segment, a 4% increase from the first quarter of 2023, the company announced during its first quarter earnings call on April 23.

For CN, petrochemicals are its third highest source of revenue next to “intermodal freight” and “grains and fertilizers.” The increase was driven primarily by increased demand for NGLs, mainly butane. Otherwise, CN’s revenue fell by 2.4% to CA$4.29 billion (US$3.14 billion) over the first quarter in 2023.

Negotiations falter

According to RailState, a firm that tracks the freight business, CNI and CP notified the Canadian government in February that union negotiations were failing, causing the government to assign a conciliation officer.

If the strike goes forward, the result could be a loss of daily transport for freight worth about CA$1 billion (US$730 million), RailState estimated in a report.

“This is truly something that I hope can be avoided. It's certainly not going to come at a good time for the country of Canada,” said Keith Creel, the CEO of Canadian Pacific Kansas City, during the company’s first quarter earnings call.

At issue is the pay for conductors and engineers as well as downtime scheduling for rest and quality of life, according to statements on the union’s web site.

CPKC has made two offers for union members to choose from: one that simplifies the prior collective bargaining agreement, and another that carries over last year’s agreement. CN has offered to change workers’ pay from salaried to annual. The union has so far rejected all offers.

“I'm hopeful and I hope that we can avoid it, but this railroad will be prepared in the event that we can't, because we will not do a bad deal,” Creel said.

The TCRC last struck in 2019, when CN yard workers and conductors refused to work for eight days.

According to RailState, freight customers cannot depend on increased train capacity following a work disruption, meaning expected freight is likely to be backed up. However, the overall freight load on the trains tends to fall after a strike, as some customers will have locked in other options while service was down.

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