CN scales back operations as volume falls, will idle section of former BC Rail

By Bill Stephens for trntrains.com

Canadian National continues to scale back its operations as traffic declines amid the coronavirus pandemic.

The railroad furloughed several hundred people in the past week, on top of the 1,400 who were furloughed in the past couple of weeks, CEO JJ Ruest said on an investor webcast Thursday.

CN’s traffic was down 13% last week on a carload basis, led by declines in automotive traffic, crude oil shipments, and frac sand. But CN continued to see strong volumes of Canadian grain, Canadian export coal, propane, and domestic intermodal.

And Ruest says CN’s network is running well as it reduces train starts in order to maintain train length and weight as volume slumps.

Ruest says the railroad expects overall volume to get progressively weaker in the coming weeks as factories shut down or curtail production and consumers cut back on spending. CN wants to be ready when volume eventually bounces back, but it’s unclear when that might happen due to uncertainty over the pandemic, Ruest says.

CN has had difficulty purchasing disinfecting products, Ruest says, so the railroad has begun making its own disinfectants in shops as well as having employees of its freight forwarding business in China buy disinfectants and send them to North America via air freight. This ensures that CN will continue to be able to disinfect locomotive cabs between crew changes, as well as sanitize things such as cranes, heavy equipment, tools, and company vehicles.

CN is preparing to open a sixth rail traffic control center to reduce the risk of COVID-19 having an impact on operations. CN previously opened two additional dispatch offices to separate rail traffic controllers who previously worked at operations centers in Edmonton, Alberta, and Chicago. Rail traffic controllers also work in Montreal.

The railroad has idled its yard in Battle Creek, Mich., as finished vehicle volume plummeted 50% last week due to major automakers shutting down plants to prevent the spread of coronavirus.

Separately, CN said it would idle a large section of its former BC Rail line due to the ongoing downturn in lumber production in British Columbia, where wildfires and a pine beetle infestation have reduced available timber. Effective on April 3, CN will suspend service between Squamish and Williams Lake, British Columbia.

Existing traffic north of Williams Lake will be routed to Vancouver via Prince George and Kamloops.

“This is not a decision taken lightly,” CN said in a statement. “We are sympathetic to the disruption of this change on the lives of our employees, particularly in the current environment, and they may have an opportunity to remain with CN in other locations. Based on collective bargaining agreements and depending on seniority, they may elect to work at other CN locations in BC and where there is a shortage of personnel.”

More than two dozen lumber mills in British Columbia shut down or curtailed production in 2019, according to the province.

CN is likely to scale back its capital spending this year, Chief Financial Officer Ghislain Houle says, but the railway will move forward with capacity expansion projects scheduled for its main lines to Vancouver and Prince Rupert, B.C., where intermodal and coal traffic are expected to rise.

Ruest and Houle spoke during a webcast with Citibank analyst Christian Wetherbee.

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