Freight train lockout or strike could halt shipments ahead of crucial harvest

Canadian National Railway and Canadian Pacific Railway prepare for possible strike

Both rail operators and some of their US competitors have begun to refuse certain cross-border cargoes.

OTTAWA, Aug 14 (Reuters) - North American industry groups and shippers are bracing for an interruption to rail service as early as next week after Canada's two largest railroads said they would lock out workers if a new labor deal is not reached by Sunday.

Canadian National Railway Co (CNR.TO) and Canadian Pacific Railway Ltd (CP.TO) said on Friday they would lock out workers represented by the Teamsters Canada Rail Conference (TCRC) union if a new contract is not in place by 00:01 ET on Monday (0401 GMT).

The TCRC represents about 3,000 conductors, engineers and yard workers at both railways.

The lockout would begin at 00:01 ET on Monday (0401 GMT) if a deal is not reached. A strike could follow if the two sides do not resolve their differences by the end of the month.

The two railways, which together handle the vast majority of Canada's grain and other commodities, said they were prepared to shut down their networks if a deal cannot be reached.

"We remain committed to reaching a negotiated settlement with the TCRC," CN Rail spokesman Jonathan Abecassis said in an email. "However, we have to prepare for all possible outcomes, including a work stoppage."

The Teamsters union did not immediately respond to a request for comment.

The potential shutdown comes at a critical time for Canada's agricultural sector, which is preparing to harvest its crops.

The railways are responsible for transporting the vast majority of Canada's grain and other commodities to ports for export.

The potential shutdown is also a concern for the broader North American economy, as the railways are a key part of the supply chain for many industries.

In a statement, the Canadian Chamber of Commerce said a work stoppage would "have a significant impact on the Canadian economy, particularly the agriculture and manufacturing sectors."

The chamber urged the two sides to reach a deal and avoid a work stoppage.

The two sides have been negotiating a new contract since May, but have been unable to reach an agreement.

The main sticking points are wages, benefits and working conditions.

The Teamsters union has said it is seeking a 32% wage increase over three years, while the railways have offered a 11.5% increase over the same period.

The union has also said it is concerned about the railways' use of overtime and the impact it is having on workers' work-life balance.

The railways have said they are committed to finding a solution that is fair to both sides.

The potential work stoppage is the latest in a series of labor disruptions in the North American rail industry.

In 2022, a strike by the Brotherhood of Locomotive Engineers and Trainmen (BLET) brought the Canadian Pacific Railway to a standstill for nearly two weeks.

The BLET eventually reached a deal with the railway, but the strike caused significant disruptions to the Canadian economy.