Thu. Dec 8th, 2022

American consumers and almost all industries will be affected if freight trains are halted next month.

One of the largest railroad unions scrapped its deal Monday, joining three others that have failed to approve contracts over concerns about demanding schedules and a lack of paid sick leave. This increases the risk of a strike, which could start as early as December 5.

It wouldn’t take long for the effects of the rail strike to trickle through the economy. Many companies have raw materials and space for finished goods in just a few days. Producers of food, fuel, cars and chemicals will feel the pressure, as will their customers.

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Not to mention the passengers who would be stranded as many passenger railroads use tracks owned by freight railroads.

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The stakes are so high for the economy that Congress is expected to intervene and impose contract terms on railroad workers. The last time American railroads went on strike was in 1992. That strike lasted two days before Congress intervened. An extended railroad stoppage did not occur for a century, in part because a law passed in 1926 regulating railroad negotiations made it much more difficult for workers to strike.

Here are some of the expected effects of the rail strike:

Railways transport about 40 percent of the country’s cargo every year. The railroads estimated that a rail strike would cost the economy $2 billion a day in a report released earlier this fall. Another recent report by a chemical industry trade group projected that if the strike lasted a month, about 700,000 jobs would be lost as manufacturers that rely on the railroads shut down, prices for almost everything would rise even more, and the economy could be pushed into recession.

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Trains are seen in the BSNF Railway Company’s north yard in Fort Worth, Texas, on September 16.

Amanda McCoy/Star-Telegram via AP

And while some companies would try to shift shipments to trucks, there aren’t nearly enough of them. The trade group Association of American Railroads estimated that 467,000 additional trucks would be needed daily to handle everything the railroads deliver.

Chemical manufacturers and refiners will be some of the first companies affected, as railroads will stop shipping hazardous chemicals about a week before the strike deadline to ensure no tankers filled with dangerous liquids are left stranded.

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Jeff Sloan of the American Chemistry Council, a trade group, said chemical plants could be close to closing by the time the railroad strike begins over it.

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VIA Rail strike talks are going down the drain

This means that the chlorine that water treatment plants rely on to purify water, which they might only have on hand for a week, would become difficult to obtain. It would be difficult for manufacturers to make something out of plastic without the chemicals that are part of the formula. Consumers will also pay more for gasoline if refineries close either because they can’t get the ingredients needed to make the fuel or because railroads aren’t available to carry byproducts like sulfur.

Chemical plants also produce carbon dioxide as a byproduct, so the supply of carbon dioxide that beverage manufacturers use for sodas and beer would also be limited, although the gas usually moves through pipelines.

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About half of all commuter rail systems rely at least partially on tracks owned by freight railroads, and almost all of Amtrak’s long-distance trains run over the freight network.

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The rail workers’ strike hit the Union Station corridor

In September, Amtrak canceled all of its intercity trains days before the strike deadline to ensure that passengers were not stranded in remote parts of the country while still en route to their destination.

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Major commuter rail services in Chicago, Minneapolis, Maryland and Washington state warned at the time that some of their operations would be suspended in the event of a rail strike.

It would take about a week for shoppers to notice in-store shortages of things like cereal, peanut butter and beer, said Tom Madrecki, vice president of supply chain for the Consumer Brands Association.

About 30 percent of all packaged food in the U.S. is transported by rail, he said. This percentage is much higher for denser, heavier foods such as cans of soup.

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Some products, such as grains, cooking oil, and beer, have entire operations built around rail shipments of raw ingredients like grains, barley, and peanuts, along with shipments of finished products.

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Those companies typically only keep two to four days of raw ingredients on hand because they’re expensive to stock, Madrecki said, and grocers also keep a limited supply of produce on hand.

Madrecki said big food companies don’t like to discuss the threat of a railroad strike because concerns about product shortages can lead to panic buying.

Any disruption to rail service could threaten the health of chickens and pigs, which depend on trains to deliver food, and contribute to higher meat prices.

“Our members rely on about 27 million bushels of corn and 11 million bushels of soybean meal each week to feed their chickens. A lot of it is moved by rail,” said Tom Super, a spokesman for the National Chicken Council, a trade group for the broiler industry.

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The National Grain and Feed Association said pork and chicken producers in the US South would be hardest hit now by a rail strike, as their local supplies of corn and soybeans from this year’s harvest are likely depleted and they would have to dramatically truck in feed. cost increase.

“They only have so much storage space. They can’t go without rail service for too long before they have to close the feed mills and run into problems,” said Max Fisher, NGFA Chief Economist.

Jess Dankert, vice president of supply chain at the Retail Industry Leaders Association, said retailers’ inventories are mostly ready for the holidays. But the industry is developing contingency plans.

“We don’t see, you know, canceling Christmas and that kind of talk,” Dankert said. “But I think we’re going to see a general disruption of everything that moves by rail.”

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David Garfield, managing director of consulting firm AlixPartners, said the rail strike could still affect holiday items shipped to stores later in December, and would definitely disrupt next season’s inventory.

Retailers are also worried about online orders. Shippers such as FedEx and UPS use rail cars that hold approximately 2,000 packages in each car.

Drivers are already paying record prices and often waiting months for new vehicles because of manufacturing problems in the auto industry linked to computer chip shortages in recent years.

This would only get worse if there was a rail strike, as approximately 75 percent of all new vehicles begin their journey from factories to sales points on the railroad. Trains deliver about 2,000 wagons full of vehicles per day.

And automakers may find it difficult to maintain plants during the strike because some major parts and raw materials are transported by rail.