A looming rail strike could destroy the US economy and cost $2 billion a day

American consumers and nearly every industry will be affected if freight trains stop next month.

One of the biggest rail unions rejected its agreement on Monday, joining three others that have failed to agree to contracts over concerns about requiring schedules and a lack of paid sick time. This increases the risk of a strike that could begin on December 5.

It wouldn’t take long for the effects of the rail strike to seep into the economy. Many companies only have a few days’ worth of raw materials and space for finished goods. Food, fuel, auto and chemical makers will feel the pressure, as will their customers.

Not to mention the passengers who will be left stranded because many commuter rail lines use tracks owned by the freight rail.

The stakes are so high for the economy that Congress is expected to step in and impose contract terms on railroad workers. The last time US railroads went on strike was in 1992. This strike lasted two days before Congress intervened. An extended railway shutdown had not occurred in a century, in part because a law passed in 1926 governing railroad negotiations made it difficult for workers to strike.

Here are some of the expected impacts of the railway strike:

2 billion a day

Railways haul around 40% of the country’s freight each year. The railroads estimated that the 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 the strike lasted a month, about 700,000 jobs would be lost as railroad-dependent manufacturers closed, prices for almost everything would rise further and the economy could get moving. in recession.

And although some companies will try to shift shipments to trucks, there aren’t nearly enough of them. The Association of American Railroad’s trade group estimated that an additional 467,000 trucks were needed per day to handle all the railroads had to offer.

Dry chemicals

Chemical manufacturers and refiners will be among the first to be hit, because railroads will stop shipping the hazardous chemicals about a week before the strike deadline to ensure no tanker cars full of the dangerous liquids stop.

Jeff Sloan of the American Chemistry Council trade group said chemical plants may be on the verge of closing by the time the railroad strike actually begins over it.

This means that the chlorine that water treatment plants rely on to purify their water, which may only have one week’s supply, will become harder to come by. 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 shut down, either because they can’t get the ingredients they need to make fuel or because railroads aren’t available to transport by-products like sulfur.

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 will also be restricted, even though the gas usually moves through pipelines.

passenger problems

Nearly half of all passenger rail systems depend at least in part on tracks owned by freight rail lines, and nearly all of Amtrak’s long-distance trains operate through the freight network.

Back in September, Amtrak canceled all long-distance trains days before the strike deadline to ensure passengers weren’t left stranded in remote parts of the country while still on their way to their destination.

Major rail services in Chicago, Minneapolis, Maryland and Washington were all warned at the time to suspend some of their operations in the event of a rail strike.

Food fears

It will take about a week for customers to notice a shortage 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.

He said that about 30% of all packaged food in the United States is transported by rail. This percentage is much higher for heavier and denser items such as soup cans.

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

These companies typically only keep two to four days’ worth of raw ingredients because it’s expensive to store, Madriki said, and grocers keep limited supplies of produce on hand.

Madriki said that major food companies do not like discussing the threat of a rail strike because of concerns about product shortages that could lead to panic buying.

hungry herds

Any disruption to 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 flour each week to feed their chickens. “A lot of that gets transported by rail,” said Tom Soper, a spokesman for the National Chicken Council, a trade group for the chicken-raising industry.

The National Grain and Feed Association said a rail strike now would hit southern US pork and chicken producers hard, because their domestic supplies of corn and soybeans from this year’s crop are depleted and they’ll have to truck feed in bulk. increased costs.

“They just have so much storage space. They can’t go without rail service for very long before they have to close feed mills and run into trouble,” said Max Fisher, NGFA chief economist.

retail risk

Retailers’ inventory is largely ready for the holidays, said Jess Dankert, vice president of supply chain for the Retail Industry Leaders Association. But the industry is developing contingency plans.

“We don’t see, you know, canceling Christmas and that kind of narrative,” Danckert said. “But I think we will see the general commotion of anything moving by rail.”

David Garfield, managing director at advisory firm AlixPartners, said the rail strike could affect holiday goods shipped to stores later in December and would certainly hinder stocking for next season’s goods.

Retailers are also interested in online orders. Shippers such as FedEx and UPS use rail cars that hold approximately 2,000 packages in each car.

Car anxiety

Drivers are already paying record prices and often wait months for new cars due to production problems in the auto industry related to computer chip shortages in recent years.

This will get worse if there is a rail strike, because approximately 75% of all new vehicles start their journey from factories to dealerships on rail. The trains transport about 2,000 carloads of cars daily.

Automakers may have difficulty keeping their plants running during a strike because some large parts and raw materials are transported by rail.