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Canadian Railway Strike Disrupts Steel, Copper Trade With U.S.

Joe Deaux and Aoyon Ashraf

(Bloomberg) -- Steel, copper, aluminum and zinc shipments between the U.S. and Canada are at risk from a strike at Canadian National Railway Co.

In the U.S., Union Pacific Corp., the largest freight rail provider in the West region, said this week that it would stop accepting shipments into or from CN Railway’s Canada locations until its operations return to normal.

Toronto-based Hudbay Minerals Inc.’s zinc and copper shipments from its operations in Manitoba would be negatively impacted by a prolonged strike, according to a Credit Suisse Group AG report. Hudbay didn’t immediately comment.

The Union Pacific notice to customers will likely hurt copper and steel shipments from the U.S., Anton Posner, the chief executive officer of supply-chain management and consulting company Mercury Resources, said in an interview. Aluminum deliveries from Quebec into the U.S. will likely be delayed, he said.

“This should have an impact, but we’re not sure how much right now,” Posner said Thursday by telephone. “It’s kind of like when you’re trying to fly from Houston and the pilot comes on while sitting on the tarmac that you’re in a ground stop because LaGuardia is too congested.”

About 3,200 workers at CN Railway went on strike Tuesday over issues including working conditions and medical benefits, the Teamsters Canada Rail Conference union said. Shares of the company fell for a fourth day, taking this week’s loss to 3.2% in Toronto as of Thursday.

CN Railway serves all nine smelters in Canada, according to the company’s annual report. It also said it has a network of 16 metals distribution centers and the largest active fleet of railcars for metals in the country.

Teck Resources Ltd. said in its 2018 annual report that its Cardinal River operations in Alberta are served by Canadian National Railway, which transports its products to ports on the west coast. The Vancouver-based company mines steelmaking coal in Cardinal River.

“We have been monitoring the situation closely, assessing potential impacts and implementing mitigation strategies,” Teck spokesman Chris Stannell said in an emailed statement, without providing details. “Any stoppage of rail service is negative for the Canadian economy as a whole. It negatively affects shippers both in terms of business and international reputation with customers.”

Hamilton, Ontario-based Stelco Holdings Inc. Chairman Alan Kestenbaum said his company hasn’t been impacted by the strike.

“We have our own rail cars and have various alternatives including using barge, ship, truck and alternative rail line,” he said in a text message.

Alcoa Corp. spokesman Jim Beck said “there’s no current impact on shipments from the smelters we operate, but we’re closely monitoring the situation.” The largest U.S. aluminum producer runs smelters at Baie-Comeau, Becancour and Deschambault in Canada.

--With assistance from Joe Richter.

To contact the reporters on this story: Joe Deaux in New York at jdeaux@bloomberg.net;Aoyon Ashraf in Toronto at aashraf7@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Steven Frank

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