Canadian National Railway’s effort to deepen its reach into consumer supply chains hinges on improving its intermodal rail service and the quality of the data running through the supply chain. Photo Credit: Shutterstock.com
Seeing a long-term decline in North American industrial activity and continued growth in industries directly serving consumers such as retail and food shipments, Jean-Jacques Ruest is driving Canadian National Railway deeper into the retail supply chain on multiple fronts. That the CN network connects to East, Gulf, and West coast ports and the railroad already sells space directly to Canadian domestic shippers provides a strong groundwork to accelerate its push.
“We need to move forward from being a great bulk and merchandise railroad, which we want to maintain, to become a fantastic railroad in intermodal so we can serve the consumer,” Ruest, CEO and president of CN, said in an Aug. 19 episode of JOC Uncharted.
That means improving its intermodal rail service and the quality of the data running through the supply chain. On the domestic intermodal side, CN is trying to inject itself deeper into the consumer supply chain by consolidating more shipments into intermodal loads. Allowing that is a uniquely Canadian way of selling directly to domestic shippers and some 50 intermodal wholesalers throughout the country. Comparatively, US-based Class I railroads outsource nearly all their domestic intermodal sales to intermediaries.
To support that increased consolidation of smaller shipments, CN acquired logistic provider TransX and the intermodal division of H&R Transport last year. As TransX handles smaller shipments mainly for the food industry, Ruest said the railroad is considering inserting itself into the dry parcel business via another acquisition or investment.
“When you look at e-commere, we’re obviously not going to be the one delivering to your door, but we want to deliver to the last big warehouse to deliver to your door,” he said.
Enhancing and build new container gateways
To boost its international business, CN is investing in a container terminal project for the first time in its history. The port, global marine terminal operator Hutchison, and CN are investing C$775 million ($588.5 million) in a semi-automated Quebec container terminal, which is set to open spring 2024.
Like it has done at the Port of Prince Rupert, CN wants to be able to attract larger vessels than those that call Montreal and be able to quickly build longer trains headed for the US Midwest. CN also sees increased potential in Halifax as PSA International retrofits its newly acquired marine terminal with deepwater access.
While Halifax and soon-to-be Quebec aren’t competing for cargo bound for and originating from Montreal, they are vying for cargo to the greater Toronto region and the US Midwest. In recent weeks, vessels diverted from Montreal due to the protracted strike at Canada’s second-largest port have called at Halifax. The strike, Ruest said, underscores the idea that having another container gateway in Quebec adds an option for shippers if there’s disruption at Montreal, which CN serves.
The railroad’s new jointly operated service with CSX Transportation connecting Montreal to upstate New York is also giving shippers options during the strike. Moving imports from the Port of New York and New Jersey, the joint-line service piggybacks off a merchandise rail service connecting Montreal and Toronto.
The service “shows that to win in the market against long-haul truck you find a way to work together,” with another Class I railroad, Ruest said. “And in a world where e-commerce and consumption is increasingly important, being able to reach your customers beyond your physical footprint is just smart business.”
Prince Rupert as a logistics ecosystem
On the West Coast, CN this summer is constructing three sidings on its route connecting to Prince Rupert, allowing it to handle more container and railcar traffic as DP World begins its third expansion of the Fairview Container Terminal. CN has begun to build a logistics ecosystem around the port by working with Ray-Mont to transload grain and lumber containers, with hoppers of resins from an Alberta plant now being transloaded, much like they are at Port of Houston, North America’s largest export gateway. Building export volumes out of Prince Rupert also makes it more attractive to carriers by providing them a better balance with import flows.
“There is also a movement to create a small logistics park in (Prince) Rupert so FEU can be destuffed and stuffed into 53-foot containers to go inland, mostly to Toronto and Montreal,” Ruest said, adding that First Nations members have been invited to be part of the burgeoning logistics eco-system and own some of the assets. “So it’s the expansion of the terminal, but also around the terminal that has to do with inbound and outbound (logistics) activities that you would find in a major city.”
Building volume from Asia to North America over the past two months shows how even during recessionary conditions, demand for consumer products remains resilient. Ruest acknowledges that growing intermodal volumes are challenged by lower diesel prices and competitive core truck pricing for domestic moves.
“Putting that aside, that’s where the market is going,” he said. “What is growing the most in North America is the service industry and people consuming stuff that’s truck-friendly. Therefore, a railroad needs to figure it out in our costs, in our service, and how we play together from time to time.”
Contact Mark Szakonyi at [email protected] and follow him on Twitter: @MarkSzakonyi.
