From automakers to refiners, industries brace for rail strike

Car buyers might not get the vehicle they want in time, commuter rail lines could see service cut, and shipments of everything from oil to livestock feed could be blocked.

These are just a few of the far-reaching impacts a walkout by American railroad workers would have on the nation’s industries and economy. A strike could take place if the railways and unions fail to settle their differences by an early Friday walkout deadline.

Here’s how some industries are assessing potential impacts and preparing for a potential work stoppage.

Almost all new vehicles that travel more than a few hundred miles from the factory to their destination are shipped by rail because it’s more efficient, said Michael Robinet, executive director of S&P Global Mobility. So new vehicles arriving in the United States from Mexico or other countries are almost certain to be delayed, he said.

“It’s not like there’s extra truck capacity to haul all the vehicles that the railroads can’t haul,” Robinet said.

Automakers could also be hampered in building vehicles, as some larger parts and raw materials are transported by rail. But Robinet said automakers will go to great lengths to get the parts needed to keep their factories running as much as possible.

Mike Austin, senior mobility analyst for Guidehouse Research, said the strike could make new vehicles even scarcer, pushing prices beyond current record highs. This could increase inflation “because other goods are not running on the rails”.

Carlos Tavares, CEO of Stellantis, said at the Detroit auto show on Wednesday that his company will eventually apologize to customers because their orders may not arrive on time.

Commuter rail service Metra, which operates in the Chicago area, said Wednesday it would suspend operations on four of its 11 lines on Friday in the event of a work stoppage. Some disruptions on these lines would begin after rush hour Thursday evening. In Minnesota, operators of a commuter rail line that carries workers along a densely populated corridor from Minneapolis to suburbs and northwestern towns have warned that service could be suspended as early as Friday.

In Washington’s Puget Sound area, any strike would cancel rail service until employees return to work, said David Jackson, spokesman for regional transportation agency Sound Transit. Some Caltrain passengers in the San Francisco Bay Area could be affected by a railroad strike, officials said.

The Maryland Transit Administration warned this week that a strike would mean the immediate suspension of service on two of its three MARC commuter rail lines.

Amtrak, meanwhile, said that starting Thursday, all of its long-distance trains are canceled to avoid possible disruption to passengers en route.

A strike could have a significant impact on the energy industry and could hurt consumers who would likely end up paying more for gasoline, electricity and natural gas. Refineries may have to shut down production if they can’t get the deliveries they need or if they don’t have access to rail to ship gasoline.

No one wants to risk leaving flammable chemicals washed up on train tracks in the event of a strike. That’s why the railroads began reducing hazardous material shipments on Monday to protect this dangerous cargo.

About 300,000 barrels of crude oil are transported by rail every day, which could supply about two medium-sized refineries, according to the AFPM. And about 5 million barrels of propane, representing a third of U.S. consumption, are shipped monthly by rail, the group said.

About 70% of the ethanol produced in the United States is shipped by rail, and ethanol accounts for about one tenth of the volume of gasoline in the United States, according to S&P Global Commodity Insights. Nearly 75% of the coal delivered to electric utilities in the first half of 2022 was delivered by rail, the group said.

According to the National Grain and Feed Association, livestock producers could see trouble almost immediately if feed shipments suddenly stop.

The meat and poultry groups noted the reliance on rail for animal feed shipments and called for a speedy resolution to the rail dispute. Each week, the national chicken industry receives about 27 million bushels of corn and 11 million bushels of soybean meal to feed the chickens, said Tom Super, senior vice president of the National Chicken Council.

Experts say retailers have shipped goods earlier in the season in recent months to protect themselves from potential disruption. But that buffer will only slightly minimize the impact of a railroad strike, which is brewing during the critical holiday shipping season, said Jesse Dankert, vice president of supply chain at Retail Industry Leaders. Association, a retail group with over 200 retailers. like Best Buy as members. She noted that retailers are already feeling the impact of the uncertainty as some freight carriers limit services.

Dankert noted that retailers, noticing a slowdown in shipments, are now making contingency plans, such as turning to trucks to make up some of the backlog and planning to use some of the excess inventory they have in their fulfillment centers. distribution.

But she noted that there were not enough trucks and drivers to meet their needs. This scarcity will only increase costs and worsen inflation, she said.

“As we’ve seen over the last two and a half years, if there’s a breakdown anywhere along the supply chain, one link fails, you see that ripple effect pretty quickly and those effects spread from there,” Dankert said.


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