CN urges investment in rail infrastructure as grain shipments hit a record high

22.08.2017

Canadian National Railway is calling on the government to invest infrastructure funds in rail capacity to Vancouver’s export terminals as the company reports that it moved a record 21.8 million metric tonnes of grain this past year.

According to the company’s 2016-2017 grain report, scheduled for release Tuesday morning, Canada’s largest railway beat its one-year record set in the 2014-2015 season by two per cent. Shipments began slowly, due to wet conditions across the Prairies, but by week seven the company was shipping more tons of grain than the previous three-year average, a pace that continued through the spring of 2017.

CN also recorded six new monthly shipping records between September and March, the peak months when grain prices are highest.

“The results reflect the impact of the strong crops, coupled with increased collaboration across the supply chain, which we believe was anchored in a more commercial approach,” said Janet Drysdale, CN’s vice president of corporate development and sustainability. The commercial approach included car-supply agreements with reciprocal penalties, which covered nearly 70 per cent of the year’s railcar supply. 

“Obviously you need a good crop to have that kind of performance, but our goal is terms of continuous improvement is there,” Drysdale said. “No matter what the grain crop holds for us, we want to move it as efficiently as possible.”

The record results come as several grain companies in Western Canada continue to make investments in the supply chain. According to CN, nine new country elevators were constructed between 2015 and 2016, and another seven are expected to be completed in the next 18 months. But the company says the new investments could challenge rail infrastructure, particularly in Vancouver. 

Doug MacDonald, CN’s vice president of bulk shipping, pointed to several recent upgrades made by CN’s customers as well as future investments, including a proposed Fraser Grain Terminal Ltd. export facility in Surrey and G3’s $500-million grain facility on Vancouver’s north shore that began construction in March. 

About half of Canada’s grain exports go to the Asia-Pacific region. In 2016, exports in bulk grain at the Port of Vancouver increased by one per cent to 22 million tonnes, a record for the third year in a row. Bulk specialty crops, including lentils and pulses, increased by 18 per cent to 4.2 million, with most destined for India, China and Bangladesh. CN’s export grain share was 52 per cent this year, and the railway expects it to grow to 55 per cent by 2022. 

“The infrastructure going to the north needs a good review and some help from the federal government,” MacDonald said. “It is a bottleneck for the future supply chain moving forward, and that needs to be addressed with infrastructure money.” 

Drysdale said CN is encouraged by the federal government’s National Trade Corridors Fund, a $2.1 billion infrastructure program aimed at bolstering Canada’s aging trade corridors. Transport minister Marc Garneau laid out loose plans in July to improve trade by investing in upgrades to existing ports, waterways, border crossings and rail networks. 

Drysdale said Vancouver’s north shore needs to be prioritized when it comes to that infrastructure funding. She also said the revenue CN earns on regulated grain shipments that travel to Vancouver’s export terminals is “inadequate to justify a return on capital investment to expand the capacity of the corridor.” 

“As we look forward, we see a bit capacity pinch point,” Drysdale said.

“We really believe that Vancouver needs to be prioritized, specifically Vancouver’s north shore, to ensure that we maintain a grain supply chain that can continue to grow Canadian grain exports.” 

In the meantime, CN is preparing for the next crop-year through its readiness programs, as well as as well as communicating with customers about planned maintenance, shipping plans and grain storage. 

“Everyone needs to expand as grain exports keeps getting bigger and bigger every year, with improved technology and a better supply chain,” MacDonald said. “It’s a very critical part of Canada’s exports being able to grow.”

Financial Post