“We are pivoting to recovery,” Chief Financial Officer Ghislain Houle told a webcast on Wednesday, noting strong growth trends in domestic intermodal, Canadian grain, and Canadian coal traffic.
Overall, CN’s July traffic was 5% better than June, and August to date is 5% better than July.
Over the past two months, CN has seen improved international intermodal volumes through the ports of Vancouver and Prince Rupert, British Columbia. Frac sand shipments have risen as drilling for natural gas has resumed in Western Canada. Canadian heavy crude is moving to U.S. refineries again. Lumber demand is up sharply. And U.S. grain exports through the Gulf of Mexico are up, while CN’s ethanol traffic is back to pre-pandemic levels.
In Western Canada — CN’s busiest region — volume is back to levels the railway saw a year ago, Chief Operating Officer Rob Reilly says.
CN has recalled 1,700 of the 2,800 train and engine employees that were furloughed at the onset of the pandemic, Reilly says. CN has 250 locomotives in storage, down from more than 700 that were parked when traffic bottomed out in May.
Based on car-miles per day — a metric that is the byproduct of average train speed and terminal dwell — CN is operating like it’s winter in Canada. Before the pandemic, cars moved an average of 225 miles per day. Now, with CN moving traffic in trains that are at record length and weight, cars are moving 165 miles per day, a 27% decline that’s more typical of a February cold snap.
“We’ll continue to see our velocity metrics improve over time here as we get resources in place,” Reilly says.
CN is not recalling crews as quickly as traffic has come back, however, as it looks to maintain efficiency gains and move more tonnage on its existing trains. Train starts are down 20% compared to a year ago, while volume is off by 12% for the quarter to date compared to last year.
Operating longer trains behind CN’s most modern power helped the railway set three straight months of fuel efficiency records that are also new records for the industry, Reilly says.
Houle and Reilly spoke on a webcast hosted by Morgan Stanley analyst Ravi Shanker.
