How Would a Railroad Strike Affect the Steel Industry?

Many industries heavily rely on railroad transportation for their materials and products. Recently, unions and institutions helped avoid a strike that had the potential to cost the economy billions of dollars each day and strongly emphasized some of the weaknesses in our supply chain. 

Fragility in the Supply Chain

This potential nationwide railroad strike could have completely changed the status of our global economy. Luckily, organizations like the Institute of Scrap Recycling Industries (ISRI), a group of worldwide corporations that process materials like glass, rubber, textiles, and more, helped avert the strike. As soon as the news broke this September, they began action by sending a letter of warning to the Congressional stakeholders on the issue before a nationwide shutdown was about to occur. 

Thanks to their reaction, a major crisis was likely averted. Trains are responsible for nearly a third of American freight shipments. Since the end of the pandemic, many supply chains are still being interrupted and are only now beginning to recover. Without a well-functioning train system, it could be an even greater setback. 

Reliance on Rail Transport

A strike could have a devastating impact across multiple sectors. Most of the goods supplied by trains are vital to the daily lives of many Americans such as, chemicals, energy, consumer products, farming equipment, and food. It is also one of the main ways that essential building materials like steel are transported.

The ISRI was one of the first to issue a statement of praise on the tentative rail strike deal this September stating,

“Rail service is vital to receiving and delivering recycled materials used in manufacturing, including the 70 percent of all U.S. produced steel which is made from recycled material… A functional freight railroad system is critical to ensuring that the American steel industry can effectively and efficiently serve its customers.”

ISRI

Steel producers in the United States depend greatly on rail transport to bring commodities to their mills and send the final result to their buyers. If this system becomes interrupted, many infrastructure plans could be halted, causing even further lags. 

Depositphotos 2939286 S - Federal Steel Supply

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Striking a Deal

It seems the economy and the railroad workers have both won with the provisory deals in place. Ten out of the twelve railroad workers unions involved have begun the process of accepting offers while two are still in negotiations. 

Railroad workers have been promised that they will receive better pay and working conditions, rightfully earned by their persistent efforts during the pandemic, without which thousands of communities would have not received many necessary goods.

However, the benefits don’t end there. The new deals will also provide incentive to recruit new railroad workers, which could prevent future disturbances in the industry and the economy. Transport costs may increase to offset the higher wages for railroad workers, but this financial set back is less likely to affect the steel industry than others according to Billy Johnson, the chief lobbyist at ISRI. 

A solid mutually beneficial labor agreement will help determine the well-being of our nation’s railroad system and hopefully ensure that the health of many industries, including steel, continues to flourish.  



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Author: Ellie Batchiyska