Economy

As rail strike looms, US industry braces for impact

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(NewsNation) — American consumers and nearly every U.S. industry will be affected if freight trains grind to a halt next month.

One of the biggest rail unions rejected a deal Monday, joining three others that have failed to approve contracts over concerns about demanding schedules and the lack of paid sick time.

That raises the risk of a strike, which could start as soon as Dec. 9 under a deadline that was pushed back Tuesday.

It wouldn’t take long for the effects of a rail strike to trickle through the economy. Many businesses only have a few days’ worth of raw materials and space for finished goods. Makers of food, fuel, cars and chemicals would all feel the squeeze, as would their customers.

United States Secretary of Transportation Pete Buttigieg said the Biden administration’s goal is to make sure a strike doesn’t happen.

“We’ve got to get to a solution that does not subject the American economy to the threat of a shutdown,” Buttigieg told NewsNation’s Leland Vittert. “We don’t have enough trucks or barges or ships in this country to make up for the rail network.”

The dependence on the already-suffering rail system would be tested, especially with other circumstances affecting the supply chain, like a Mississippi River drought affecting much of the midwest.


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About 60% of the Midwest and northern Great Plain states are in a drought. Nearly the entire stretch of the Mississippi River — from Minnesota to the river’s mouth in Louisiana — experienced below-average rainfall in the months leading to November.

“While the barge crews, the coast guard, and everybody has done a phenomenal job of dredging the rivers, making sure they continue to float boats, the efficiency has been down tremendously,” said Josh Linville, the Vice President of Fertilizer for StoneX Financial Inc. “We are not able to move nearly as much per day.”

Linville says the combination of drought affecting river transportation and the threat of a rail strike affecting rail transportation is a devastating combination that would be very difficult to come back from.

“A rail strike is still going to be tremendously devastating to our agricultural system,” said Linville. “We’re finishing up harvest of 2022, so now, all of a sudden we need to move these grains South. We need to move them internationally. Without rail we can’t do that.”

The stakes are so high for the economy that Congress is expected to intervene and impose contract terms on railroad workers. The last time U.S. railroads went on strike was in 1992. That strike lasted two days before Congress intervened. 

Here are some of the expected impacts of a rail strike:

$2 BILLION A DAY

Railroads haul about 40% of the nation’s freight each year. The railroads estimated that a rail strike would cost the economy $2 billion a day in a report issued earlier this fall. Another recent report put together by a chemical industry trade group projected that if a strike drags on for a month some 700,000 jobs would be lost as manufacturers who rely on railroads shut down, prices of nearly everything increase even more and the economy is potentially thrust into a recession.

And although some businesses would try to shift shipments over to trucks, there aren’t nearly enough of them available. The Association of American Railroads trade group estimated that 467,000 additional trucks a day would be needed to handle everything railroads deliver.

CHEMICALS RUN DRY

Chemical manufacturers and refineries will be some of the first businesses affected, because railroads will stop shipping hazardous chemicals about a week before the strike deadline to ensure that no tank cars filled with dangerous liquids wind up stranded.

Jeff Sloan with the American Chemistry Council trade group said chemical plants could be close to shutting down by the time a rail strike actually begins because of that.

FILE – This April 2, 2021, file photo shows freight train cars and containers at Norfolk Southern Railroad’s Conway Yard in Conway, Pa. (AP Photo/Gene J. Puskar, File)

That means the chlorine that water treatment plants rely on to purify water, which they might only have about a week’s supply of on hand, would become hard to get. It would be hard for manufacturers to make anything out of plastic without the chemicals that are part of the formula. Consumers will also pay more for gasoline if refineries shut down, either because they can’t get the ingredients they need to make fuel or because railroads aren’t available to haul away byproducts like sulfur.

Chemical plants also produce carbon dioxide as a byproduct, so the supply of carbon dioxide that beverage makers use to carbonate soda and beer would also be restricted, even though the gas typically moves via pipelines.

PASSENGER PROBLEMS

Roughly half of all commuter rail systems rely at least in part on tracks that are owned by freight railroads, and nearly all of Amtrak’s long-distance trains run over the freight network.


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Back in September, Amtrak canceled all of its long-distance trains days ahead of the strike deadline to ensure passengers wouldn’t be left stranded in remote parts of the country while still en route to their destination.

And major commuter rail services in Chicago, Minneapolis, Maryland and Washington state all warned then that some of their operations would be suspended in the event of a rail strike.

FOOD FEARS

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

About 30% of all packaged food in the U.S. is moved by rail, he said. That percentage is much higher for denser, heavier items like cans of soup.

Some products, like cereal, cooking oils and beer, have entire operations built around rail deliveries of raw ingredients like grain, barley and peanuts, along with shipments of finished products.

Those companies typically keep only two to four days’ worth of raw ingredients on hand because it’s expensive to store them, Madrecki said, and grocers also keep a limited supply of products on hand.

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

HUNGRY HERDS

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

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

The National Grain and Feed Association said a rail strike now would hit pork and chicken producers in the southern U.S. hardest, because their local supply of corn and soybeans from this year’s harvest is likely exhausted and they’d have to ship feed by truck, dramatically increasing costs.

“They only have so much storage. They can’t go without rail service for too long before they’d have to shut down the feed mills and they run into problems,” said Max Fisher, the NGFA’s chief economist.

RETAIL RISKS

Jess Dankert, the vice president for supply chain at the Retail Industry Leaders Association, said retailers’ inventory is largely in place for the holidays. But the industry is developing contingency plans.

“We don’t see, you know, canceling Christmas and that kind of narrative,” Dankert said. “But I think we will see the generalized disruption of really anything that moves by rail.”


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David Garfield, a managing director with the consulting firm AlixPartners, said a rail strike could still impact holiday items shipped to stores later in December, and would definitely hamper stocking of next season’s goods.

Retailers are also concerned about online orders. Shippers like FedEx and UPS use rail cars that hold roughly 2,000 packages in each car.

AUTOMOBILE ANGST

Drivers are already paying record prices and often waiting months for new vehicles because of the production problems in the auto industry related to the shortage of computer chips in recent years.

That would only get worse if there is a rail strike, because roughly 75% of all new vehicles begin their journey from factories to dealerships on the railroad. Trains deliver some 2,000 carloads a day filled with vehicles.

And automakers may have a hard time keeping their plants running during a strike because some larger parts and raw materials are transported by rail.

The Associated Press contributed to this report.

© 1998 – 2022 Nexstar Media Inc. | All Rights Reserved.

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