MMD

CN grows thanks to competitors’ actions

Abandoned routes leave CN in driver's seat


CN locomotives.

MONTREAL, Quebec— Canadian National Railway says its market growth is being propelled in part by the decision of rivals, including Canadian Pacific, to abandon some routes.

CN’s chief marketing officer Jean-Jacques Ruest said the company’s main competitor, CP, is changing its focus and shifting its operations. As CP’s business has changed, CN has benefited, at least to some degree.

“It’s more about the market that they abandon,” he told a Scotiabank transportation and aerospace conference.

For example, CN now offers the only direct railroad to Detroit from the west coast. Similar changes have also affected smaller markets such as Milwaukee.

“It’s more about the things that they decide to do less of. We still do very well so we’ve picked up some business that seems to be no longer attractive to them.”

Ruest described CN’s growth as “organic plus.

“The plus comes obviously from other service providers.”

CN is also tapping into the growing “energy renaissance” in the United States by reopening a rail line that has been closed for more than 15 years in order to transport fracking sand to Wisconsin for use in drilling for natural gas.

The upcoming fourth quarter tends to be a slow seasonal period, depending on whether winter arrives early.

“We had a very good month of October, November is decent, so when you look at the fourth quarter you are really looking at when will winter hit,” he said.

The last three weeks are key in terms of costs, where winter in the Canadian prairies means costs.

The railway has maintained its earnings growth outlook for 2012 despite anticipating a difficult end to the year due to a weak economy that will be set against last year’s strong fourth quarter.

The final quarter will compete with a strong finish to last year when it booked a record 12 per cent increase in revenues and 20 per cent boost to adjusted profits in the fourth quarter.

It expects continued growth to transport grain, potash, intermodal and forest products. Crude oil deliveries by rail are expected to double. It will disclose the location of a new US terminal in the first quarter.

Ruest said its plans to build a new line in Quebec’s north could be affected by the volatility of iron ore prices, which may prompt some producers to delay the opening of their mines.

This week, Cliffs Natural Resources Inc announced that it has delayed portions of its Bloom Lake mine expansion in Quebec while also idling some production at two of its US iron ore operations.

The decision to stop work on the concentrator and load out facility at Bloom Lake puts 450 contractors off the job.

Labrador Iron Mines president and chief operating officer Rod Cooper said that CN’s feasibility study on a new multi-user rail line to Labrador and rail terminal at the Port of Sept-Iles is proceeding as planned. He said the railway expects to have a final route selection completed in the next month and to submit environmental impact statement in February.