Rail unions secure tentative deal, avoiding a strike

United States railroad unions have secured a tentative deal after about 20 hours of talks brokered by the Biden administration to avert a rail shutdown that could have impacted supply chains nationwide, freezing many cargo shipments and causing inflation to spike.

According to a report from Reuters, Biden administration officials hosted labor contract talks Sept. 14 to secure an agreement between unions, which represent 115,000 workers and railroads, including Union Pacific, BNSF, CSX, Norfolk Southern and Kansas City Southern. Negotiations between the companies and a dozen unions had been ongoing for more than two years.

Industry associations, such as the Washington-based Institute of Scrap Recycling Industries (ISRI), the Washington-based American Iron and Steel Institute (AISI) and the Washington-based American Chemistry Council (ACC), have sent letters to congressional leaders urging them to help avert a possible railroad strike.

“Rail service is vital to the receiving and delivering recycled of materials used in manufacturing—including 70 percent of all U.S.-produced steel, which is made from recycled material,” ISRI states in its letter to congressional leaders. “Without rail shipments of ferrous metal, steel mills across the country will be forced to slow or even shut production. The same is true for other recycled materials such as aluminum, paper, copper, plastics and glass. Moreover, even a short rail strike would send a ripple effect through our economy that will take months to recover from as these supply chains will be disrupted.

“Rail service is also critical to ensuring the recycled materials industry can provide materials that are a sustainable alternative to those that require cutting trees, mining, drilling or harvesting scarce natural resources. Moving recycled materials off the rail system and onto trucks would not only increase carbon emissions but also clog our nation’s highways.”

AISI President and CEO Kevin Dempsey sent a letter to congressional leadership Sept. 14 urging Congress to act if a voluntary agreement in the rail negotiations had not reached a conclusion. Had the rail industry not come to a tentative agreement, Dempsey says, it would have had serious negative consequences for the U.S. economy, including the steel industry.

“Our nation’s railroads not only serve as the arteries for American commerce—they are an indispensable necessity for the health and survival of our domestic steel industry,” Dempsey says. “American steel producers rely heavily on railroads for transporting raw materials to their mills and for shipping finished steel products to the market. A functional freight railroad system is critical to ensuring that the American steel industry can effectively and efficiently serve its customers. At a time when our nation’s supply chains for critical materials like steel have not yet fully recovered from the COVID-19 pandemic, it would be a tremendous setback for supply chains to suffer another blow. … A voluntary agreement among all parties to the ongoing rail negotiations is clearly the best outcome. But if negotiators fail to reach an agreement by the end of the cooling off period, we urge Congress to act to ensure that our nation’s freight rail system remains operational.”

The ACC sent a letter to congressional leaders Sept. 9, asking lawmakers to “closely monitor” the contract negotiations for freight rail workers and to act quickly to prevent a work disruption.

“Freight rail is critical to ACC’s members and chemical manufacturing,” ACC’s letter states. “Our industry is one of the largest freight rail customers, shipping 2.2 million carloads in 2021. We rely on railroads to safely transport our products to customers around the United States and the world. A rail strike or work stoppage of any length would cause potentially devastating harm to our industry, the nation’s supply chains and the economy. … A fair and workable rail labor agreement is a critical step towards resolving the ongoing freight rail service crisis that is already harming American manufacturers, farmers and energy producers. ACC believes a negotiated solution between the parties is always the preferred outcome.”

With a tentative deal in place, Reuters reports that the unions must now vote on this deal. President Joe Biden says the tentative agreement reached “is an important win” for the economy and the nation.

“It is a win for tens of thousands of rail workers who worked tirelessly through the pandemic to ensure that America’s families and communities got deliveries of what have kept us going during these difficult years,” Biden says in a statement on the tentative rail agreement. “These rail workers will get better pay, improved working conditions and peace of mind around their health care costs, all hard-earned.”

Biden says the tentative deal also benefits railway companies, helping to ensure they can retain and recruit more workers.

“I thank the unions and rail companies for negotiating in good faith and reaching a tentative agreement that will keep our critical rail system working and avoid disruption of our economy,” Biden adds.

Billy Johnson, chief lobbyist at ISRI, says if the tentative agreement isn’t ratified, it could spell problems for supply chains and the economy. He adds that rail networks have already notified some customers that they were not picking up shipments in light of the potential strike.

“They were preparing for the worst. That already has sent a few ripples through the marketplace,” he says. “It just takes a blip for that to happen. I would expect railroads to remain tentative … holding to these customer warnings.”

He adds that if the agreement passes, it likely will lead to increased transportation costs to pay for higher wages among rail workers. 

“Costs are going to go [up] through the system, obviously,” Johnson says. “Most of these [rail companies] are publicly traded companies, and they will try to keep profits up. They will have to pass labor costs over. That means that most likely, even if scrap prices don’t go up … the price of transportation will go up and so the price of steel will go up. I don’t see the steel industry absorbing much, and I would imagine that they will pass on as much of the cost as possible.”