Canada’s Two Major Railways Well-Poised for Further Increased Traffic 2019

Last week, the Canadian Transportation Agency flexed its newly enhanced authority under the 2018 Transportation Modernization Act and launched an investigation into whether rail companies are fulfilling their obligations following industry complaints, with hearings set for next week.
In an email to Globe and Mail, Canadian National Railway acknowledged the recent congestion on the West Coast. It pointed to harsh weather and the intricate supply network that feeds into Canada’s busiest port.
For the railways that serve Canada’s busiest port, Canadian Pacific Railway, CN, and US railway BNSF, the Vancouver, BC, hearings bring two unwelcome prospects: possible government intervention and a public airing of customer grievances, said Globe and Mail Thursday.

Canada’s forestry and legume industries say the country’s two major railways prioritized other commodities over their shipments to the Port of Vancouver late last year, costing companies millions amid surging demand for Canadian goods abroad, according to Canadian Press Wednesday.
Derek Nighbor, head of the Forest Products Association of Canada, said pulp mills were told by the railways on three occasions in late November through mid-December that their cars were being halted. This forced the companies to pay extra costs for trucks, storage and additional rail-car fees.


Three sets of embargoes affected forestry products in Vancouver and nearby Squamish, BC, and marked the second year in a row of frequent stoppages, Nighbor said. He claimed the lost sales, rebooked routes and additional storage cost his sector $500 million in 2018.

Mr. Nighbor said the total price of the winter rail slowdown has not been calculated, but poor rail service had already cost the companies he represents $500-million in 2018.

CP said last week that it takes “great exception” to being included in the investigation, noting it broke its own record for Vancouver grain shipments in November.

“It wasn’t all commodities caught up in this and I’m interested in understanding why,” Mr. Nighbor said by phone. “We need a diagnostic. This is the second year in a row this has happened.”

In an email to Canadian Press, CN acknowledged the recent congestion on the West Coast. It pointed to harsh weather and the intricate supply network that feeds into Canada’s busiest port.
CP cited record grain shipments and a busier port in recent months as global trade tensions work in Canada’s favour, with a Chinese tariff on US soybeans and retaliatory European tariffs on US corn spurring more Canadian exports.


In the Vancouver area, CN moved record volumes of freight in November, December and, to date, January. The Montreal-based company invested in rail cars, track doubling and expanded rail yards — particularly between Chicago and the West Coast — to the tune of $3.5 billion over the past year, 30 per cent more than its three-year average. It has plans to keep building in 2019.
Calgary-based CP, meanwhile, aims to have 1,000 more grain cars in service by this spring, following CN’s order for 1,000 hoppers last May. The two railways shipped +23% more oil and petroleum in 2018 to drive a four per cent increase in total freight traffic, according to the Association of American Railways. READ MORE:

Canadian Pacific Railway posted sharply higher adjusted earnings Thursday as gains in shipments of potash, oil, coal and other commodities drove a +17% jump in revenue.

CP said 4Q earnings a share jumped +41% to a quarterly record of $4.55, and revenue reached $2-billion. CP shares climbed +2% in after-hours trading. The company’s closely watched operating ratio, a measure of cost, improved to 56.5 per cent.

CP moved 2.64 million tonnes of Canadian grain and grain products in October, a company record for monthly shipments that it nearly matched in November.
For it’s part, CN reported the highest quarterly revenues in its 99-year history in October, spurred on by revenue growth of between +15% and +25% for grain and fertilizers as well as metals and minerals, forest products and coal, according to CTV News January 4. CP, though lacking its rival’s broad access to maritime ports, traffics heavily in bulk commodities such as grain, potash, coal and fertilizer that amount to 44 per cent of its revenue, according to a DBRS report from October.