(Reuters distributed the following article by Charles Grandmont on March 4.)
MONTREAL — Container traffic at Canadian National Railway Co. dropped 26 percent last week from the week before because of a strike by nearly a quarter of its employees, but overall traffic was down just 3 percent, the company said on Thursday.
CN said the sharp drop in container traffic was cushioned by a 4 percent increase in carload shipments such as grain, forest products or metals and minerals.
Company figures show a 14 percent drop in overall freight traffic last week from the year-earlier period after a 9 percent year-on-year slide in the previous week.
CN will resume contract talks on Friday, at the start of the third week of a strike by 5,000 mechanics, sales clerk and intermodal yard workers.
The strike, the longest at CN in more than 15 years, has thinned movements of railcars along Canada’s biggest railway. But company officials refused to comment on the impact the strike was having on its revenues and profit.
Some analysts say the extra costs caused by the strike have more than wiped out savings from unpaid wages.
Deutsche Bank Securities analyst John Barnes said last week the strike could cut CN’s first quarter profit by up to 10 percent.
Analysts expect CN profit to increase 14 percent in the first quarter to 58 cents per share, according to Reuters Research.
TRUCK ALTERNATIVE
The strike is having an impact on major clients such as the Canadian Wheat Board, the biggest seller of wheat worldwide, which has complained of minor delays in deliveries, and in the forestry sector where CN is North America’s biggest hauler of timber products.
“It requires some adjustments and extra work, but it’s a period of the year where we are always fighting to get more railcars,” said a spokesman for forest products company Tembec Inc. .
Lumber prices have risen 5 percent since the strike began, in part because of concerns of a railcar shortage, JP Morgan analyst Claudia Shank said in a research note this week.
She said the pulp market could also be hit as CN transports up to 95 percent of pulp in some parts of Eastern Canada.
“There is a risk of truck shortages as demand increases, particularly given the large volume of commodities that need to be transported,” she said.
Shippers like Abitibi-Consolidated Inc., the world’s biggest newsprint maker, have already turned to trucks, although it normally moves 40 percent of its newsprint by rail. “We don’t see a big impact, but everybody is running after the same thing,” a spokesman for Abitibi said.
The CN employees, represented by the Canadian Auto Workers (news – web sites), went on strike on Feb. 20 after rejecting a proposed 3 percent annual pay increase.
CN’s network, which is ranked as the most efficient North American railway, stretches across Canada and down through the United States to the Gulf of Mexico. Its U.S. workers are not on strike.
The union has said it would not submit new proposals to its members unless the company rolls back its new discipline system. Workers say the new rules bring “military discipline” to the workplace, union negotiator Abe Rosner said.
The union is also seeking improvements in the pension plan, social benefits and shift premiums.
CN stock rose 8 Canadian cents to C$52.03 on the Toronto Stock Exchange on Thursday. In New York it rose 28 cents to $39.03.
($1=$1.33 Canadian)