CN’s terrible, horrible, no good, very bad start to the year

Posted by Bill Stephens
on Monday, March 2, 2020

CN service to Prince Rupert, B.C., was halted for six days in February 2020 after protesters blocked the tracks in central British Columbia. Here CN train 199 crosses the Khyex River, 20 miles east of Prince Rupert, in September 2019. Bill Stephens photo
It would be hard to imagine a worse start to the year for Canadian National, whose volume is down 16% due to a string of events that’s mostly odd, unrelated, and unrelenting. CN is taking it on the chin, as no other North American railroad has seen its volume fall by more than 10% this year and rival Canadian Pacific’s traffic is up 10%.

First, there was Mother Nature. Winter arrived in January with eight days of deep cold in Western Canada, forcing CN to restrict train length. Then powerful rainstorms lashed southern British Columbia starting Jan. 30, washing out CN’s main to Vancouver for six days.

The major washouts occurred in the rugged Fraser River canyon directional running zone where CN and CP share trackage, with CN hosting westbounds and CP carrying eastbounds. The railways had to resort to running directional fleets of 15 to 20 trains at a time over CP’s line. The single-track bottleneck caused eastbound traffic to stack up at the Port of Vancouver and westbounds to be staged as far away as the Prairies. The directional running zone ranks among the top three freight mains by tonnage in North America, alongside BNSF Railway’s Southern Transcon in the Southwest and Union Pacific’s triple track across Nebraska. So this blockage was, by itself, a big deal.

Then came nearly a month of civil protests. On Feb. 6, as CN began digging out from the washout backlog, the first of several First Nations blockades set up camp on CN’s tracks. The blockades, protesting a proposed natural gas pipeline in British Columbia, halted traffic on CN’s Montreal-Toronto mainline in the East. Also ultimately affected: CN’s 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 affected, too, but to a much lesser extent. CP even hosted detour traffic for CN between Montreal and Toronto.

As if that wasn't enough, then came regulatory woes. The same day the protests began, a CP crude oil train derailed and caught fire in Guernsey, Sask., the second such wreck in the area since December. Hours later Transport Canada issued a ministerial order that restricted key trains – those with 20 or more cars of hazardous materials – to 20 mph in metropolitan areas and 25 mph elsewhere. With the stroke of a pen, Transport Minister Marc Garneau’s knee-jerk reaction effectively reduced CN’s overall capacity by a third. You could call this slowdown “Whoa Canada!”

The impact of all this showed up starkly in CN’s key performance metrics for the week ending Feb. 14. Average train speed, which began the year at a healthy 20.3 mph, sank 23% to 15.9 mph. And car-miles per day, an all-in metric that’s the result of train speed and terminal dwell, fell 40%, to 136 miles from 228 in the first week of January.

The washout and network slowdown rippled throughout the Canadian supply chain, including a massive on-dock container backlog at Vancouver, Canada’s busiest port. CN’s on-dock container footage spiked to 200,000 feet, roughly double the usual volume, according to port authority data.

Mercifully, Garneau modified his order on Feb. 16, permitting key trains to operate at 50 mph in signalled territory and 30 to 35 mph in metropolitan areas depending on the commodity and volume carried per train. CN immediately began bouncing back, and on-dock container volume at Vancouver has quickly returned to normal levels.

Meanwhile, CN on Feb. 13 was forced to shut down its network in Eastern Canada due to the ongoing First Nations protests. Some 400 trains had been cancelled over the prior week, a number that does not include the suspension of virtually all VIA Rail passenger service from coast to coast. CN furloughed 450 or so people in the East as a result of the illegal blockades and has since recalled workers as service resumed.

On Sunday the federal government reached 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 provincial police have been playing whack-a-mole with blockades. Once one is cleared, another pops up. So it remains to be seen if the agreement will produce lasting results.

But one thing’s for sure: Problems with Mother Nature, regulatory overreach, and civil protests are temporary setbacks. CN’s terrible, horrible, no good, very bad start to the year won’t affect the railway’s long-term growth prospects, which remain bright. Port expansions in Vancouver and Prince Rupert will enable CN to haul more containers and bulk traffic over the next few years. More grain elevators are being built alongside CN lines on the Prairies. And the railway has a Feed the Beast strategy to put more traffic on its underutilized Eastern network, including attracting international intermodal business to Halifax, Nova Scotia, and Quebec City.

For now, as CN works off its traffic backlog, January and February remain months the railway would rather forget.

You can reach Bill Stephens at bybillstephens@gmail.com and follow him on Twitter @bybillstephens 

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