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From automakers to refiners, industries brace for rail strike

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

Those are just some of the far-reaching impacts that a strike by American rail workers would have on the country’s industries and economy. A strike could happen if the railways and the unions cannot resolve their differences before the early Friday strike deadline.

This is how some industries are measuring the potential impacts and preparing for the possible work stoppage.

Nearly all new vehicles that travel more than a couple of hundred miles from the factory to their destination are shipped by rail because it’s more efficient, said Michael Robinet, chief executive of S&P Global Mobility. Therefore, new vehicles arriving in the US from Mexico or other countries will almost certainly be delayed, he said.

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

Automakers could also be hampered in building vehicles, because some larger parts and raw materials are transported by rail. But Robinet said automakers will do whatever they can to get the parts to keep their factories running as long as possible.

Mike Austin, senior mobility analyst at Guidehouse Research, said the strike could make new vehicles even more scarce, driving prices up beyond current record levels. That could increase inflation “since other goods are not moving along the rails.”

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

The Metra commuter rail service, which serves the Chicago area, said Wednesday it would suspend operations on four of its 11 lines on Friday if a work stoppage occurs. Some outages on those lines would begin after rush hour on Thursday night. In Minnesota, operators of a commuter rail line carrying workers along a densely populated corridor from Minneapolis to northwestern suburbs and towns have warned that service could be suspended Friday.

In the Puget Sound region of Washington state, any strike would shut down rail service until employees return to work, said David Jackson, a spokesman for the Sound Transit regional transit agency. Some Caltrain passengers in the San Francisco Bay Area could be affected by a rail strike, officials said.

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

Amtrak, for its part, 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 need to stop production if they can’t get the deliveries they need or don’t have access to rail to ship gasoline.

No one wants to risk leaving flammable chemicals stranded on train tracks if a strike occurs. That’s why the railroads began reducing hazardous materials shipments Monday to protect that dangerous cargo.

About 300,000 barrels of crude move by rail each day, which could supply about two medium-sized refineries, according to AFPM. And about 5 million barrels of propane, accounting for a third of US consumption, are transported monthly by rail, the group said.

About 70% of ethanol produced in the US is shipped by rail, with ethanol accounting for about a tenth of US gasoline volume, according to S&P Global Commodity Insights. Nearly 75% of the coal moved to power utilities in the first half of 2022 was moved by rail, the group said.

Livestock producers could see trouble almost immediately if feed shipments were to end abruptly, according to the National Grain and Feed Association.

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

Experts say retailers have been shipping products earlier in the season in recent months as a way to protect themselves from potential disruptions. But this buffer will only slightly minimize the impact of a rail strike, which is brewing during the critical holiday shipping season, said Jesse Dankert, vice president of supply chain for the Retail Industry Leaders Association, a retail trade group that It has more than 200 retailers. such as Best Buy as its members. He noted that retailers are already feeling the impact of the uncertainty, as some carriers are limiting 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 slack and making plans to use some of the excess inventory they have in their distribution centers.

But he noted that there are not enough trucks and drivers to meet his needs. Such shortages will only increase costs and worsen inflation, he said.

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


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