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Railroads Wind Down Shipments as Strike Deadline Looms

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Railroads Wind Down Shipments as Strike Deadline Looms

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September 14, 2022

By Kim Chipman and Ryan Beene (Bloomberg) —

US railroads are poised to stop shipments of farm products and other key goods starting Thursday as the industry braces for a possible labor strike that could cost the world’s biggest economy more than $2 billion a day.

Norfolk Southern Corp. said it plans to halt unit train shipments of bulk commodities on Thursday ahead of a potential US rail worker strike the following day. The railroad also said it would stop accepting autos for transit at its facilities starting Wednesday afternoon. Other railways are likely to follow suit, according to one agriculture group. 

“We are hearing several rail carriers are tentatively planning to wind down shipments,” said Max Fisher, chief economist at the National Grain and Feed Association, which represents most US grain handlers.

A halt to shipments of grains, fertilizer, fuel and other crucial items threatens to hobble the US economy at a time of rampant inflation and fear of a prolonged global economic slump. Food-supply chains are especially at risk as farmers are gearing up for harvest and need to get their supplies to customers. Crops are especially in high demand due to shortages from the war in Ukraine and weather woes across the globe.

Prices for corn for loading into barges along the Mississippi River were rising Wednesday, as demand to ship grain on the water increases. That could accelerate as the harvest gets going over the next month.

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

Norfolk Southern intends to cease taking vehicle deliveries for transit as of 5 p.m. local time Wednesday and close its intermodal gates as well at that time, the Virginia-based railway said in a notice.

Representatives for BNSF Railway Co. and Union Pacific Corp. also signaled they were prepared to curtail service as the deadline looms. “We must take actions to prepare for the eventuality of a labor strike if the remaining unions cannot come to an agreement,” BNSF said in a statement.

The halting of cargoes by some railways is aimed at ensuring crews aren’t stranded if a work stoppage occurs Friday morning, Fisher said. Reuters earlier reported on the plan.

With November midterm elections less than two months away, Democratic President Joe Biden is personally trying to break the logjam between industry and labor unions. The White House has started crafting contingency plans to ensure critical materials can reach consumers in the event of a work stoppage, a sign negotiations still have a long way to go.

US Labor Secretary Marty Walsh plans to meet with railroad and union representatives in Washington on Wednesday morning, a spokesperson for the department said.

Fertilizer, Plastics

Railways are no longer shipping ammonia, an important component of about three quarters of all fertilizer, because it would be dangerous if the hazardous material was stranded during a potential rail strike, according to the Association of American Railroads. Ammonia is used in explosives as well as being an essential nutrient for plants.

A halt to rail shipments of ethanol threatens to reverse the recent slide in US gasoline pump prices from a record high. Almost three-quarters of the nation’s supply is moved on trains, mostly from Midwest plants — where corn is made into the fuel additive — to the East and West Coasts for blending into gasoline.

The petrochemical industry may be forced to slow down production at plants that churn out plastics and other products needed in industries across the US if shipments of key hazardous chemicals necessary are delayed for an extended time. 

Coal-fired power plants would continue to operate, drawing from on-site inventory, but utilities’ reserves fell to a 24-year low a year ago and haven’t increased much since then. Miners would likely continue to dig up the fuel, as long as they have space at their facilities to let it pile up.

“Once available storage is full the plants would have to cut rates,” Robert Stier, senior petrochemicals analyst at S&P Global Commodity Insights, said in an email. “These hazardous materials are the first products impacted. These are difficult to ship by any other means than specialized rail cars.”

–With assistance from Edward Dufner, Michael Hirtzer, Elizabeth Elkin, Dominic Carey, Rebecca Rainey and Will Wade.

© 2022 Bloomberg L.P.

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