It would be hard to imagine a worse start to the year for Canadian National, whose volume is down 16% due to a series of mostly bizarre, unrelated and relentless events. CN is taking the upper hand, as no other North American railroad has seen its volume drop more than 10% this year and its rival Canadian Pacific’s traffic is up 10%.
First, there was Mother Nature. Winter arrived in January with eight days of intense cold in Western Canada, forcing CN to restrict train lengths. Then powerful rainstorms hit southern British Columbia from January 30, sweeping CN’s mainline to Vancouver for six days.
The main washouts have occurred in the rugged Fraser River Canyon directional racing zone, where CN and CP share the tracks, with CN heading west and CP heading east. The railways had to resort to directional fleets of 15 to 20 trains at a time on the CP line. The single-track bottleneck has resulted in an accumulation of eastbound traffic at the Port of Vancouver and westbound to the Prairies. The Directional Traffic Zone ranks among the top three freight by tonnage pipelines in North America, alongside BNSF Railway’s Southern Transcon in the southwest and Union Pacific’s Triple Track across Nebraska. So this blockage was, in itself, a big problem.
Then came nearly a month of civil protests. On February 6, as CN began to clear the wash backlog, the first of several First Nations roadblocks set up a camp on CN tracks. The blockades, in protest of a proposed pipeline in British Columbia, have cut off traffic on CN’s Montreal-Toronto main line in the east. Also affected in the end: the CN line to Prince Rupert, British Columbia, which was blocked by protests for six days. Other protests came and went in Edmonton, Alberta; Winnipeg, Manitoba; Quebec; and British Columbia. CP was also affected, but to a much lesser extent. CP even accommodated detour traffic for CN between Montreal and Toronto.
As if that weren’t enough, came regulatory problems. On the same day the protests began, a CP crude oil train derailed and caught fire in Guernsey, Saskatchewan, the second such wreck in the region since December. Hours later, Transport Canada issued a ministerial order limiting key trains – those with 20 or more cars of hazardous material – to 20 mph in metropolitan areas and 25 mph elsewhere. With the stroke of a pen, the instinctive reaction of Transport Minister Marc Garneau effectively reduced CN’s overall capacity by a third. You might call this downturn “Whoa Canada!” “
The impact of all of this was clearly evident in CN’s key performance indicators for the week ending February 14. Average train speeds, which started the year at a good 20.3 mph, fell 23% to 15.9 mph. And car kilometers per day, an aggregate measure that results from train speed and terminal stopping, fell 40% from 228 to 136 miles in the first week of January.
Leaching and the downturn in the network have spilled over into the entire Canadian supply chain, including a huge backlog of containers docked in Vancouver, Canada’s busiest port. Images of containers at CN’s dock reached 200,000 feet, about double the usual volume, according to data from port authorities.
Fortunately, Garneau changed his order on February 16, allowing key trains to run at 50 mph in the reported territory and 30 to 35 mph in metropolitan areas depending on the cargo and volume carried by train. CN immediately began to rebound, and container volume at the dock in Vancouver quickly returned to normal levels.
Meanwhile, on February 13, CN was forced to shut down its network in eastern Canada due to ongoing First Nations protests. Some 400 trains had been canceled in the previous week, a number that does not include the suspension of virtually all VIA Rail passenger services from coast to coast. CN has laid off about 450 people in the East following the illegal blockades and has since recalled workers when they return to service.
On Sunday, the federal government struck a tentative deal with the Wet’suwet’en hereditary chiefs to end the protests, which of course have nothing to do with CN. Over the past month, the provincial police have been playing hard with the blockades. Once one is cleared, another appears. So it remains to be seen whether the deal will deliver lasting results.
But one thing’s for sure: Problems with Mother Nature, over-regulation, and civil protests are temporary setbacks. CN’s terrible, horrible, not good, very bad start to the year will not affect the railway’s long-term growth prospects, which remain good. The expansion of the ports of Vancouver and Prince Rupert will allow CN to move more containers and bulk over the next few years. More grain elevators are being built along CN lines on the Prairies. And the railway has a Feed the Beast strategy to increase traffic on its underutilized eastern network, including attracting international intermodal companies to Halifax, Nova Scotia and Quebec.
For now, as CN clears its backlog, January and February remain months the railroad would rather forget.
You can reach Bill Stephens at [email protected] and follow him on Twitter @bybillstephens