Nova Chemicals preps for potential Canadian rail strike

Nova Chemicals is taking certain precautions such as making early shipments and forward placement of inventory at US storage locations to mitigate against potential polyethylene (PE) supply disruptions caused by a possible Canadian rail strike that could take place as early as 22 May, the company said in a letter to customers.

The Canadian National (CN) and Canadian Pacific Kansas City (CPKC) railroads are (currently negotiating contracts)[https://direct.argusmedia.com/newsandanalysis/article/2553764] with the Teamsters Canada Rail Conference, which represents 9,300 employees across both railroads. The earliest a strike could begin is 12:01am ET on 22 May, but any work stoppage at either railroad could cause widespread disruption to rail traffic across Canada.

"NOVA Chemicals utilizes CN and CPKC to serve our manufacturing facilities and delivery polyethylene products and co-products to our customers," the company said in a 15 April letter to customers. "A labor strike within the Canadian railroad industry will result in disruptions and delays, impacting the timely delivery of these products."

Where practical, the company said it will ship product early prior to any strike, it said in the letter. It will also attempt to place some inventory at US off-site storage locations before the strike takes place, which will allow it to continue to serve US customers during a strike. Additionally, Nova said it is maintaining a direct line of communication with rail officials, and creating contingency plans for raw materials supply.

"Despite our best efforts to mitigate these challenges, there may be instances where shipments are delayed or rerouted due to the strike action," the letter says.

If a strike takes place, market participants said it would likely last around 3-4 days, but could cause delays to shipments for up to two weeks. However, the overall US/Canada market is well-supplied, so any shipment delays should not create significant tightness in the market, sources said.

Union employees at each railroad will vote electronically from 8 April to 1 May on whether to approve a strike.

By Michelle Klump