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Canadian National Railway Co. is preparing for a strike by 3,200 train operators, halting shipments of some goods as it negotiates to reach a settlement ahead of a midnight deadline for a walkout that would stop freight on Canada’s largest rail network.

CN has told some large companies it is winding down some rail service ahead of a possible strike, a safety measure that will cause most chemical manufacturers to shut down operations within a couple of days due to a lack of on-site storage, said Bob Masterson, head of the Chemistry Industry Association of Canada.

Shutting down a chemical plant is an expensive process that can take days to reverse, but an industry that relies on a steady supply of rail cars for storage and delivery has no choice, said Mr. Masterson, who speaks for Dow Chemical Co., Nova Chemicals and other manufacturers that rely on trains to move 80 per cent of their goods.

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“If those cars aren’t moving, you’re shut down. There’s no big storage tank for chlorine on the side of your property,” he said.

CN and the Teamsters Canada Rail Conference (TCRC), which represents train conductors and yard workers, have been in mediated contract talks for five months. The previous contract expired in July. The two sides cannot agree on prescription drug benefits, rest periods and the practice of driving trains using remote-control devices worn by employees, which the union says is unsafe, said Christopher Monette, a spokesman for the union.

A CN spokesman declined to comment on Monday. On Nov. 16, CN said in a news release, “We continue to negotiate in good faith to reach a fair agreement before the strike deadline. In the spirit of protecting the Canadian economy, we have offered the union binding arbitration and they have declined.”

The railway plans to use qualified managers to operate some freight trains, focusing on the port operations that handle cargo containers, according to an internal memo seen by The Globe and Mail. The managers, many of whom are former train operators, are being moved into place ahead of a possible strike so they are rested and prepared, the memo said.

A CN strike would have a serious impact on the Canadian economy, given the lack of alternatives to train transportation. Trucks lack the capacity to replace rail cars, and most mines, paper mills and other rail shippers are served by one rail company.

Bob Ballantyne, president of the Freight Management Association of Canada, said some large retailers began preparing for a CN strike weeks ago, rerouting containers arriving on ships from Asia to U.S. ports served by other railways, a step that adds costs.

“It varies from company to company but it can have a really serious impact,” Mr. Ballantyne said. “For manufacturing companies that have continuous processes … if the raw goods coming in to feed that process stop, they gotta shut it down."

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CN and other rail companies are facing a drop in freight volumes in Canada and the United States, as trade tensions and a sluggish economy weigh on manufacturing output and exports.

CN is laying off about 1,600 of its 24,000 employees as it cuts management and union jobs to match the drop in freight volumes.

CN made a profit of $1.2-billion in the latest quarter and posted a 4-per-cent rise in revenue to $3.8-billion, compared to the third quarter of 2018. CN attributed the rise to higher freight rates and better volumes in its container-shipping business, but reduced its profit outlook due to the weakening economy.

In a press release, the TCRC union decried CN’s “obsession with profits and shareholder return” while demanding workers accept lifetime caps on prescription drug coverage.

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