“The volumes are much weaker than what we expected,” Houle told an investor conference on Wednesday.
Revenue ton miles were up 3% in the first half of the year, so volume would have to increase 7% in the second half of the year in order to reach the 5% or so growth that the railway was projecting.
“It will be very difficult, obviously, when you look at volumes to date,” Houle says.
CN’s revenue ton miles are up 2.4% so far this year as U.S. export coal business slumped, British Columbia lumber production declined, and Canadian crude oil shipments did not grow as much as expected.
But over the longer-term CN sees plenty of growth opportunities, including international intermodal, Canadian export coal, and Canadian grain.
“There’s so many lines in the water that we will catch quite a bit of fish,” Houle says.
One of CN’s biggest fish is the Port of Prince Rupert, British Columbia, where intermodal volume is up 30% this year, thermal coal export tonnage is up 37% through July, and propane exports began in the spring.
“Rupert is the gift that keeps on giving,” Houle says.
The container terminal at Prince Rupert, which was expanded in 2017, is already running at its 1.35 million twenty-foot equivalent unit capacity, Houle says. Another terminal expansion is under way and the port authority is eyeing a site for a second container terminal that could ultimately allow Rupert to handle up to 7 million TEUs. Two thirds of the containers are bound for destinations in the U.S. Midwest.
CN aims to replicate the success of Prince Rupert at the container terminal in Halifax, Nova Scotia, which currently runs at just 20% of its 750,000 TEU capacity.
“Halifax is a huge opportunity,” Houle says.
CN will target a slice of container traffic that currently moves from the Port of New York and New Jersey to Midwestern destinations like Chicago and Detroit. Last month, railway executives met with their counterparts from PSA, the new operator of the Halifax container terminal, to talk about plans to ramp up volumes that will feed CN’s underused main line across Eastern Canada.
Export coal traffic at Prince Rupert, already growing, will get a significant boost from the privatization of the Ridley Island coal terminal. The new operators, which include the owners of British Columbia mining company Conuma Coal Resources, plan to boost Ridley’s capacity by 40% initially, then add a second berth that would more than double export capacity.
Houle spoke at the Cowen & Co. 12th Annual Global Transportation Conference.
People blame the railroads when unforeseen traffic spikes, but shareholders blame the railroad when they build too much capacity…
if freight volume is down is there a chance that the Canadian psgr train will resume its previous faster schedule and run on time?
Since Prince Rupert intermodal is doing so well I’m wondering who is the big loser. LA-Long Beach?
Talking about that “under-used main line across Eastern Canada”, it wasn’t that much under-used before Harrison managed to ditch a good chunk of its traffic, and force the remaining traffic on two pair of trains that, some days, are running so long that they can only meet on a single stretch of double track between Joffre and Moncton.
Adding a single pair of trains along that line is nearly impossible, because it will immediately result in a crew shortage.
And that’s supposed to be an efficient way of running a railroad.