Ann Maria Shibu and Rod Nickel

(Reuters) – Canadian Pacific Railroad (NYSE:) has halted operation and locked out employees in a labor dispute on Sunday morning. Each side blames the other for the halt, which will most likely affect shipment of important commodities during a period of high prices.

Dave Fulton of Teamsters Canada Rail Conference stated that “we are very disappointed by this turn in events.” According to the union, it has been striking across the country for the dispute it said affects 3,300 engineers, conductors, and yard workers.

Canada’s second largest railroad operator claimed that the union misrepresented the position of the company. The Teamsters stated in a statement, “Well aware of the harm this reckless act will cause to Canada’s supply chain.”

Seamus O’Regan Jr, Minister of Labour, stated that CP was still in the discussion with federal mediators.

He tweeted, “We are closely monitoring the situation and expect the parties will continue working until they achieve an agreement.”

Canada is second in size after Russia and heavily dependent on railways for moving manufactured goods and commodities from port to country. The network covers a large portion of south Canada as well as Kansas City, Missouri in the United States.

Canada’s supply chain is in serious trouble. Last year, floods in British Columbia washed away track and prevented access to Canada’s largest port. CP said that a stoppage could disrupt the movement and transport of grains, coal, potash, or both.

CP had notified the union Wednesday that it will lock out its employees Sunday if negotiations fail to reach a compromise on a pensions deal, which would also cover pay and benefits.

The union’s demand for higher pension caps is its key negotiation issue, it said. Nadeem Velani, Chief Financial Officer of the Railway told an investor conference in New York on Tuesday that they were not willing to comply with that request.

Canada’s Nutrien (NYSE:) stated this week that it could have to cut potash production in its Saskatchewan mines if the shutdown continues for more than a few weeks.

Eight-day Canadian National Railway (TSX:) Co Strike in 2019 was the last significant railway disruption. According to the Western Canadian Wheat Growers Association, 12 stops have occurred in 12 years due to weather problems, labor blockades, or poor weather.