CN recovery to take ‘weeks, not days’ after 8-day strike curtails shipments
CN recovery to take
weeks, not days’ after 8-day
strike curtails shipments
Canadian National Railway will take weeks, not days, to recover from the backlog caused by an eight-day strike that ended this week with a tentative deal between the country’s largest railway and Teamsters Canada, the union representing 3,200 conductors and yard workers.
“We’re looking at weeks to recover fully,” Sean Finn, CN’s executive vice-president of corporate services, said in an interview Thursday. “This is a complex network — 21,000 miles of track that at any given time 100,000 rail cars are operating on.”
It’s not yet clear how much the strike will cost CN and its customers, but a CIBC analyst estimated a week-long strike could cost $180 million for the railway alone. CN shares fell 0.5 percent on Thursday to $122.25 in Toronto.
During the strike, CN operated its network at about 10 percent capacity. It will take between one and four weeks to clear the backlog depending on how far a customer is from an operating yard and how frequently they typically receive service, Finn said.
CN expects it will be more challenging to catch up in Western Canada, the busier portion of its network where ships are waiting at the Port of Vancouver for trains to travel in and out with products to ship.
Despite mining, forestry, propane and agricultural industry groups clamoring for space on the resumed railroad, Finn said CN’s recovery plan is based on moving cars efficiently rather than prioritizing specific commodities.
“You try and make sure you don’t pick winners and losers,” he said. “You have to look at it and say, ‘What’s the most efficient way to move a train?’”
That means not moving trains to block other trains, and looking at commodities that are ready to move and customers that are ready to receive trains.
It’s not as if we’re picking grain versus propane versus potash. The priority is given to trains that would be in the way or that we can move very efficiently.
Sean Finn, CN Rail
“It’s not as if we’re picking grain versus propane versus potash,” he said. “The priority is given to trains that would be in the way or that we can move very efficiently.”
CN is speaking with customers daily to manage their expectations. It can prioritize their needs in urgent cases. For instance, it shipped two trains of propane from Edmonton to Montreal over the weekend to ease the propane shortage feared by farmers that need to fuel to heat barns and dry crops. The problem isn’t fully resolved but it’s a substantial improvement, Finn said.
CN started moving trains off its mainline tracks on Tuesday afternoon, hours after the tentative deal was announced. When crews returned to work on Wednesday, they started moving cars parked in the yards and switching them to local customers to free up space.
“The secret is to always have a room in that yard to receive an incoming train, or stage it in a way you can get access to it relatively quickly,” Finn said, adding it’s more of an art than a science.
The Edmonton-based operating team is working day and night to clear the backlog quickly.
“These are demanding times to catch up; we want to make sure that people remain safe, that we don’t cut any corners,” Finn said. “I want to thank all of our employees, our customers, and our partners and stakeholders for their patience and support during the strike. This was not an easy time for anybody.”
Longer term, this labour disruption does not change our long-term thesis on CN.
CIBC analyst Kevin Chiang
While Finn said it’s premature to calculate the costs of the strike, CIBC analyst Kevin Chiang roughly estimated the cost at $180 million per week based on the cost of a (not perfectly comparable) previous strike for CN’s competitor, Canadian Pacific Railway.
The disruption lasted longer than expected based on historical precedents, Chiang noted to clients. The average length of CP’s last three rail strikes in 2012, 2015 and 2018 was three days, he wrote, with the government passing back-to-work legislation in 2012.
“To state the obvious, and what has been echoed by some of CN’s customers, the strike has had significant disruption to its usual level of service due to its limited ability to operate,” Chiang noted. “Longer-term though, this labor disruption does not change our long-term thesis on CN.”
National Bank analyst Cameron Doerksen also remains positive on CN’s long-term growth despite slowing Canadian rail volumes exacerbated by the conductor strike, he noted to clients this week.
CN and CP both lowered their shipment forecasts in October, blaming an economic slowdown, trade wars and a late grain harvest for the troubles.