(The Canadian Press circulated the following story by Allan Swift on June 17.)
MONTREAL — Canadian National Railway Co. is expecting a big boost in its container traffic when the Port of Prince Rupert, B.C., completes its first container terminal sometime next year.
Chief executive Hunter Harrison told analysts Thursday that a planned container terminal at the Pacific port will give CN a competitive advantage over other railways and Prince Rupert an edge over other West Coast ports serving Asian markets.
A spokesman for the Prince Rupert Port Authority said the port is expected to announce within 60 days a partner to build a container terminal, able to handle large container ships carrying consumer goods from China and other countries.
Port authority spokesman Shaun Stevenson said the B.C. provincial government has also committed $17 million to the terminal project.
Harrison said CN’s investment at Prince Rupert is partly dependent on getting federal approval for its $1-billion takeover of B.C. Rail, announced last November but still under review by the Competition Bureau.
If the controversial B.C. Rail deal goes through, CN is already committed to spend $15 million to modify its line between Prince Rupert and its mainline track west of Edmonton, to make it possible to carry two stacked containers on each railcar, as the mainline network already can.
“There’s a huge opportunity in Prince Rupert,” Harrison said in a presentation to analysts.
Prince Rupert says it is the deepest natural harbour in North America, and is located 30 hours’ sailing time closer to Asia than other west coast ports
CN, with the only rail link, says it could shuttle the containers to the continental hub at Chicago 1.5 days faster than from any other port.
Inter-modal traffic, the shipping of standard-sized steel containers that also go on ships and trucks, accounts for 19 per cent of CN revenues.
Harrison said that while the inter-modal business is growing, it has to improve margins to achieve the profits of its other divisions. “Inter-modal has grown in the double digits but it has clearly not had the return to invest in the franchise.”
He said the company intends to increase its freight rates by about two to three per cent a year, given that its service has improved with faster and more reliable trains. In recent years the rate increases have been one to two per cent.
“We can only sustain the price increases if we continue to provide the quality, to raise the service bar,” Harrison said at the Merrill Lynch-sponsored transportation conference.
Harrison also revealed Thursday that CN is in negotiation to move a trainyard located near an unnamed major urban centre, and to sell the real estate, valued at $340 million to $400 million.
He added that the railway plans to close “a major hump yard” in Canada, over the next five years.
CN recently divulged a five-year target to grow earnings and earnings per share by between eight and 12 per cent annually.
Harrison said Thursday CN has the capacity to achieve this growth without major increases to operating expenses.
CN shares (TSX:CNR) were up eight cents to $56.43 on the Toronto stock market Thursday.