TORONTO (Reuters) – A labor dispute that halted operations at Canadian Pacific (NYSE:) Railway Ltd on Sunday will exacerbate raw material shortages due to Russia’s invasion of Ukraine, and a prolonged lockdown could hurt farmers in the run-up to the spring planting season.
CP, Canada’s No. 2 railroad, halted operations after talks with unions failed, with both sides blaming each other for the outcome. Talks continued on Sunday with federal mediators at the table.
Canada, the second largest country by area after Russia, relies heavily on rail to transport raw materials and manufactured goods to its port. With 75% of all fertilizer in Canada being shipped by rail, the agricultural sector will feel the heat, industry association Fertilizer Canada said. The agricultural sector is already struggling with shortages and higher prices as a result of Western economic sanctions against Russia and Belarus, two major fertilizer producers.
“The main issue is the short term in getting farmers the fertilizer they need for their crops. We are 4-6 weeks away from sowing in Canada and even earlier in the US,” said Karen Proud, president and CEO of Fertilizer Canada.
The impact of the strike was felt south of the border, as CP’s rail network runs as far south as Kansas City in the United States.
“A CP shutdown will bring additional uncertainty to US fertilizer markets,” said Corey Rosenbusch, the president and CEO of the Fertilizer Institute, adding that the United States imports 86% of its potassium from Canada, much of it per week. track.
Nutrien (NYSE:) Ltd, the world’s largest fertilizer producer, could weather a CP shutdown of a few days as it moved potash from its Canadian mines to U.S. stores ahead of spring planting, interim director Ken Seitz told Reuters . But a longer shutdown would force Nutrien to slow its production of potassium, Seitz said.
Nutrien plans to increase potassium production by nearly 7% this year to around 15 million tons due to supply uncertainty.
The lockout at CP is the latest blow to Canada’s battered supply chain, which endured flooding in British Columbia last year, shutting down access to Canada’s largest port.
An eight-day strike at Canadian National Railway (TSX:) Co in 2019 cost the fertilizer industry between C$200 million – C$300 million ($159 – $238 million), the industry group estimates.
The Mining Association of Canada said the work stoppages, such as those experienced by CPs, add additional operational costs to businesses and “decrease confidence in Canada” as an investment destination for companies dependent on the supply chain.
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