Canada CP Rail strike to add to commodities supply shock sparked by Ukraine war

[March 21, 2022]  TORONTO (Reuters) - A labor dispute that shut down operations at Canadian Pacific Railway Ltd on Sunday is set to aggravate a shortage of commodities sparked by Russia's invasion of Ukraine, and a prolonged lockdown could hurt farmers ahead of the spring planting season.

CP, Canada's No. 2 railroad, halted operations after talks with workers' union failed, with both sides blaming each other for the outcome. Talks continued on Sunday with federal mediators at the table.

Canada, the largest country by area after Russia, depends heavily on rail to move commodities and manufactured goods to port. With 75% of all fertilizer in Canada moved by rail, the farm sector will feel the heat, industry body Fertilizer Canada said. The agricultural sector is already facing shortages and higher prices due to Western economic sanctions on Russia and Belarus, two major fertilizer producers.

"The main issue is the short window to get farmers the fertilizer they need for their crops. We are 4-6 weeks away from seeding in Canada and even sooner in the U.S.," President and CEO Fertilizer Canada Karen Proud said.

The impact of the strike could be felt south of the border as CP's rail network runs as far south as Kansas City in the United States.

"A CP work stoppage will bring additional uncertainty to fertilizer markets in the U.S.," Corey Rosenbusch, the Fertilizer Institute president and CEO said, adding the United States imports 86% of its potash from Canada, much of it by rail.

Nutrien Ltd, the world's biggest fertilizer producer, could weather a CP shutdown lasting a few days, since it has moved potash from its Canadian mines to U.S. stores ahead of spring planting, interim Chief Executive Ken Seitz told Reuters. But a longer shutdown would force Nutrien to consider slowing potash production, Seitz said.

Nutrien plans to boost potash output by nearly 7% this year to about 15 million tonnes due to supply uncertainty.

The lockout at CP is the latest blow to Canada's battered supply chain, which last year weathered floods in British Columbia that suspended access to Canada's biggest port.

An eight-day strike at Canadian National Railway 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 that of CP's bring extra operational costs to businesses and "reduce confidence in Canada" as a destination for investment for supply-chain reliant businesses."

($1 = 1.2601 Canadian dollars)

(Writing by Denny Thomas; Editing by Jacqueline Wong)

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