But CN also is keeping an eye on its longer-term growth opportunities, CEO JJ Ruest said at investor conferences this week, and will forge ahead with capacity projects that were planned before COVID-19 hit.
CN will build three new sidings this year between Edmonton, Alberta, and the Port of Prince Rupert, British Columbia, to support ongoing expansions that will enable the port to handle more container traffic as well as rising volumes of coal and propane exports over the next three years.
“You should see that as a sign of confidence that this is a long-term gateway for CN to serve North America,” Ruest says.
CN has added or extended five sidings and built two sections of second main on its single-track route to Prince Rupert over the past two years, and facilities in and around the port are in the midst of a $350 million capacity expansion jointly funded by CN, the Prince Rupert Port Authority, and the Canadian federal government.
In Vancouver, the largest port on Canada’s West Coast, CN will continue to participate in $400 million of expansion projects jointly funded by the railway, the port, and Ottawa.
CN also is proceeding with plans to build a new deepwater container terminal at Quebec City to handle containers moving from Asia to North America via the Suez Canal. The Quebec terminal, a partnership involving CN, Hutchinson Ports, and the Port of Quebec, is expected to open in 2024.
Overall, CN has scaled back its capital budget slightly this year due to the pandemic, to $2.9 billion from $3 billion.
But Ruest noted that CN spends 20% of its revenue on capital expenses, putting it at the high end of the railroad industry. Other railroads, he notes, have reduced capital spending to 14% of their revenue.
“That’s not what we want to do,” Ruest says. “We believe the pandemic will change the world, but there is a world beyond the pandemic.”
CN will not get caught short of capacity like it did in 2017 and 2018, Ruest says.
The railway paused expansion projects during the traffic downturn in 2016, then lacked the track, crew, and locomotive capacity required to handle an unexpected surge of traffic in Western Canada that began in 2017 and continued into 2018. CN then spent record amounts to add capacity west of Chicago and Winnipeg, Manitoba, in 2018 and 2019.
“Having learned from that, that’s why we continue to expand some capacity … right now,” Ruest says.
Ruest spoke at the Bank of America and RBC investor conferences this week.
Charles, Just for once could you keep your right wing politics out of this forum?
Did not get to finish before macro cut out. The quote from the article mentioned a partner in the Quebec City facility, as ‘Hutchinson Ports’ Isthis the ‘re-branded’ Hutchinson- Wampoa that has bought int a goodly part of the Operations on both ends of the Panama Canal ? Would hate to think that the Canadians have let that Chinese operator get its foot in the door up there. Seems the Chinese have had lots of money to throw into various transportation projects around the world, in the last sevferal years…Just askin’ .
Just a question: “…The Quebec terminal, a partnership involving CN, Hutchinson Ports, and the Port of Quebec, is expected to open in 2024.
TROY – So you think the Canadian railroads have it right? Couldn’t agree more! I live nowhere near Canada, but the biggest and the best railroads in my home area are CNR and CPR. We also have a UPRR secondary main but I ignore it. Today out for a bike ride saw a magnificent CPR stack, which was followed by a ditch and forestry crew. Life is coming back here in Wisconsin, with two great Canadian railroads and the state supreme court slapping down Governor Evers’ illegal lockdown.
Wow spending money on capital improvements to improve your business and grow revenue instead of share buy backs, what a novel concept.
I was pleased two years ago when CN had the foresight to appoint JJ as their CEO. He has proven to be the thoughtful leader I always knew him to be. This former rail shipper wishes the other Class 1’s had CEO’s with JJ’s level of vision.