The ongoing global supply-chain issues and higher commodity prices amid the Russia/Ukraine conflict have taken a toll on corporations and consumers.
Amid challenges, the work stoppage at Canadian Pacific Railway (TSE: CP), after a failed negotiation with the labor union, will likely exacerbate the problems further as the shipments of key commodities and goods are expected to get impacted.
Both the Canadian Pacific Railway and the employees union blamed each other for the deadlock.
The railroad company’s CEO, Keith Creel, stated that the TCRC (Teamsters Canada Rail Conference represents about 3,000 locomotive engineers, conductors, train and yard workers across Canada) negotiating committee “failed to respond to the company’s latest offer that was presented to them by the federal mediators.”
Creel added that the TCRC withdrew its services ahead of the deadline. As a result, Canadian Pacific Railway announced a shutdown of its operations across Canada.
Now What?
Given the importance of the supply chain Canadian Pacific Railway serves, its direct links to major ports on the west and east coasts, and the ongoing global crisis, the work stoppage could have severe consequences, primarily on the agriculture sector.
Taking note of it, Fertilizer Canada has called out the federal government to take immediate steps to counter the negative impact of the work stoppage on the fertilizer supply chain.
Karen Proud, the CEO of Fertilizer Canada, stated that 75% of Canada’s fertilizers are moved through rail, implying that disruption would impact farmers and the economy.
Further, Corey Rosenbusch, the CEO of Fertilizer Institute, noted that the U.S. imports most of its potash from Canada by rail. Rosenbusch added that a work stoppage at CP “will bring additional uncertainty to fertilizer markets in the U.S.”
Amid the standoff, minister of labor Seamus O’Regan Jr. tweeted that the Canadian Pacific Railway and the union have restarted the negotiations with the help of a federal mediator.
The Bottom Line
Notably, a prolonged work stoppage will add to the supply-chain woes and hurt Canadian Pacific Railway’s financial and operating performance. However, most Wall Street analysts maintain a bullish outlook on CP stock.
Canadian Pacific stock sports a Strong Buy consensus rating on TipRanks, based on nine Buys and three Hold ratings assigned in the past three months. Further, the average Canadian Pacific price target of C$107.37 implies 6.9% upside potential from current levels.
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