As the 2022 U.S. railroad strike looms, the impact on the U.S. economy could be significant
OMAHA, Neb. — American consumers and almost every industry will be affected if freight trains stop next month.
One of the railroad’s biggest unions rejected its deal on Monday, joining three others who did not approve the contracts due to 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 a railroad strike to ripple through the economy. Many companies only have a few days of raw materials and space for finished products. Manufacturers of food, fuel, cars and chemicals would all feel the pressure, as would their customers.
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Not to mention commuters who would be stranded because many passenger railroads use tracks owned by freight railroads.
The stakes are so high for the economy that Congress should step in and impose contract terms on railroad workers. The last time the US railroads went on strike was in 1992. That strike lasted two days before Congress intervened. A prolonged rail shutdown hasn’t happened in a century, in part because a law passed in 1926 that governs rail negotiations made it much more difficult for workers to strike.
Here are some of the expected impacts of a rail strike:
$2 BILLION A DAY
The railways transport about 40% of the national freight each year. The railroads estimated 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 predicted that if a strike drags on for a month, some 700,000 jobs will be lost as railway-dependent manufacturers close, prices of almost everything will rise even further. and the economy could be pushed into a recession.
And although some companies are trying to shift shipments to trucks, there aren’t enough available. The Association of American Railroads trade group estimated that an additional 467,000 trucks a day would be needed to handle everything the railroads deliver.
Chemical makers and refineries will be among the first businesses hit, as the railroads will stop shipping dangerous chemicals about a week before the strike deadline to ensure no tank cars full of liquids dangerous does not get stuck.
Jeff Sloan of the American Chemistry Council trade group said chemical plants could be on the verge of closing by the time a railroad strike begins over it.
This means that the chlorine that water treatment plants rely on to purify water, of which they may only have about a week’s supply, would become difficult to obtain. It would be difficult 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 close, either because they cannot get the ingredients they need to make fuel or because railroads are unavailable to transport sub- products such as sulphur.
Chemical plants also produce carbon dioxide as a by-product, so the supply of carbon dioxide that beverage makers use to carbonate soda and beer would also be limited, although the gas generally travels through pipelines.
About half of all commuter rail systems rely at least in part on tracks owned by freight railroads, and almost all of Amtrak’s long-distance trains run on the freight network.
In September, Amtrak canceled all of its long-distance train days before the strike deadline to ensure passengers would not be 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 have all warned that some of their operations will be suspended in the event of a rail strike.
It would take customers about a week to notice shortages of products 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 United States is transported by rail, he said. This percentage is much higher for denser, heavier items like soup cans.
Some products, like grains, cooking oils, and beer, have entire operations built around rail deliveries of raw ingredients like grains, barley, and peanuts, as well as shipments of finished goods.
These companies typically only keep two to four days worth of raw ingredients on hand because storing them is expensive, Madrecki said, and grocers also keep a limited amount of produce.
Madrecki said big food companies don’t like to discuss the threat of a railroad strike because worries about product shortages can lead to panic buying.
Any disruption to train service could threaten the health of chickens and pigs, which rely on trains to deliver their food, and contribute to higher meat prices.
“Our members rely on approximately 27 million bushels of corn and 11 million bushels of soybean meal each week to feed their chickens. Much of it comes by rail,” said Tom Super, spokesman for National Chicken. Council, a trade group for the chicken-for-meat industry.
The National Grain and Feed Association said a railroad strike would hit pork and chicken farmers in the southern United States the hardest, as their local supply of corn and soybeans from this year’s crop is likely to be sold out and they would have to ship food by truck, in a dramatic way. increased costs.
“They only have a limited amount of storage. They can’t go without rail service for too long before they have to shut down feed mills and they run into problems,” said Max Fisher, chief economist. of the NGFA.
Jess Dankert, vice president of supply chain at the Retail Industry Leaders Association, said retailers’ inventory was largely in place for the holidays. But the industry is developing contingency plans.
“We don’t see, you know, undoing Christmas and that kind of narrative,” Dankert said. “But I think we’ll see the widespread disruption of really anything that travels by rail.”
David Garfield, chief executive of consultancy AlixPartners, said a railway strike could still impact holiday items being shipped to stores later in December and would certainly hamper the stockpiling of next season’s goods .
Retailers are also concerned about online orders. Shippers like FedEx and UPS use railcars that hold approximately 2,000 packages in each railcar.
Drivers are already paying record prices and often waiting months for new vehicles due to production problems in the auto industry linked to shortages of computer chips in recent years.
This would only get worse in the event of a railroad strike, as around 75% of all new vehicles begin their journey from factories to dealerships on the railroad. The trains deliver approximately 2,000 carloads of vehicles per day.
And automakers can struggle to keep their factories running during a strike because some larger parts and raw materials are transported by rail.
Associated Press writers David Pitt in Des Moines, Iowa, and Dee-Ann Durbin in Detroit contributed to this report.
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