Canadian National Railway has been an industry leader in making intermodal comparable to a truck service to attract shippers that demand fast and reliable freight transportation - and continues to hone its products.
Intermodal revenue at CN grew 11 percent, or C$204 million (U.S.$153 million), in 2012 to C$2 billion (U.S.$1.5 billion), according to this week's financial results, but executives are not resting on their laurels when it comes to the company's largest line of business.
Chief Marketing Officer Jean-Jacques Ruest, in an earnings call with analysts on Tuesday, projected the Montreal-based railroad's intermodal revenue would grow 10 percent this year with the aid of new innovations and investment.
One of the products being introduced this year is a returnable sled insert aimed at moving tubes, steel coils, conduits and other long-steel products in domestic 53-foot containers to compete with flatbed trucks, Ruest said. The mobile transportation tray, called OnDeck, is a platform that can hold up to 50,000 pounds of steel product and be rolled by a forklift into the container in less than a minute, spokesman Mark Hallman said. The additional floor spreads out the weight of the steel so it's not concentrated in one area and gives the container more structural stability.
Officials said the service is aimed at steel producers in the Chicago area and southwest Ontario who need to move product to energy production sites in Western Canada and to auto parts plants in Mexico. Containers provide protection from rain, snow, dust and other conditions for steel that would be covered by a tarp on a flatbed truck, Ruest said.
(Watch a video of the new OnDeck loading process
on CN's Website - click over to the sixth video in the series.)
CN will also add a cross-border refrigerated container service in 2013, Ruest said.
The railroad already has a reefer service for international shipments moving from the ports of Vancouver and Prince Rupert to central Canada, but will extend it to the United States, Hallman explained. CN will also help move agricultural products in temperature-controlled units from California to the Toronto and Montreal markets through interline agreements with the Union Pacific and BNSF Railway that serve the western two-thirds of the United States, he said.
"That's a long-haul truck market we want to get into," he added.
Other innovations in the planning pipeline include moving finished vehicles in containers to certain markets and adding plastic flexitanks to move liquids in containers, Chief Executive Officer Claude Mongeau said.
"Using the intermodal product to sell to different markets and selling one CN are key to our ability to outpace (market averages) and gain market share against trucks," he said.
Last year, CN invested in five extended sidings to handle 12,000-foot trains on its British Columbia-North corridor on which international merchandise from Asia moves from Prince Rupert to the Chicago area and large Canadian cities. The sidings increased the company's capacity by 50 percent by allowing faster trains to pass other ones and more are planned in the future, Chief Operating Officer Keith Creel said. In 2011, more than half a million intermodal units moved over the corridor and officials say traffic on the line could nearly double by 2015.
Since 2004, CN has extended or constructed 21 sidings between Edmonton and Prince Rupert and spent more than C$150 million on new capacity.
The ability to utilize longer, heavier trains has increased efficiency by requiring fewer train starts and reducing network congestion.
A fourth crane scheduled to be installed this spring by Maher Terminals in Prince Rupert to help unload container vessels and CN's recent expansion of its siding outside the port are also expected to help improve volumes, Ruest said. CN typically operates one train per day from Prince Rupert, although it recently ran two trains for a short heavy period and can accommodate three trains per day if traffic warrants, Hallman said.
Meanwhile, CN is expanding its geographic reach with this month's announcement of a partnership with the Indiana Rail Road Co. to build an intermodal terminal in downtown Indianapolis
, with service between the ports of Vancouver and Prince Rupert. The company is also adding another intermodal terminal in the Chicago area.
CN is adding new intermodal customers. In October, shipping line APL signed a contract with CN to move containers from the Port of Vancouver and Japanese line MOL this month hired CN to move boxes from Vancouver, Ruest said. A large U.S. retailer that is expanding into Canada will begin using the CN this spring, he added. Officials declined to name the U.S. company, but Target Corp. announced plans in 2011 to open stores north of the border this year.
CN also experienced strong growth in its bulk commodities last year. While most railroads are grappling with major declines in coal volumes as utility demand falls, CN achieved a 15 percent increase in coal revenue to C$712 million and an 18 percent increase in revenue-ton-miles because the coal it hauled is for export markets.
Officials said they anticipate further growth in coal business this year after Ridley Terminals in Prince Rupert completes the second-phase expansion of its coal terminal.
Ridley is on schedule to complete installation and commissioning sometime between February and April of a giant machine that stacks coal in the yard and reclaims it to put on conveyors to load ships, bringing the terminal's capacity to 18 million tons per year from 13.5 million tons, spokeswoman Michelle Bryant said.
The terminal will reach 25 million tons of capacity by the end of 2014.
CN primarily hauls coal from mines in Alberta to Prince Rupert, but Ruest said there are good prospects to haul U.S. coal from the Powder River Basin in Montana and Wyoming to Rupert for export to Asia. New coal mines planned in Alberta could eventually raise annual export volumes for coal to 40 million tons, he said.
CN is also making a major commitment to moving crude oil by rail from Canadian oil sands in Albert and the Bakken Shale field in North Dakota/Montana. The railroad transported 30,000 cars of crude in 2012 and officials said they expect to double that this year. CN has the highest revenue per car in the industry because its length of haul is so long to refineries on the Gulf Coast.
"Canada is an energy powerhouse. We have gas, we have oil. If we play our cards right there’s a huge potential for transportation and infrastructure companies to helping the booming energy market for many years to come,” Chief Financial Officer Luc Jobin said.
CN's revenue-ton-miles should grow faster than its carload volume because so much of its business involves long-distance transportation, including imported consumer goods (intermodal), export potash, export coal and crude, Ruest said.
“It’s our goal to position ourselves where the market is looking for our services. It so happens at the moment the markets that are hot are longer haul. But we’re pursuing every opportunity where there is a profit to be made whether it’s shorter haul or longer haul," he said. - Eric Kulisch