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CTY LTD Update
The purpose of this Information Bulletin is to bring everyone up to date
on what has happened since the CTY LTD Ratification.
Railroad workers have been fighting fatigue in the
rail industry for decades but the problem persists. We are now asking
you to help us document the problem.
Railways positioned for
long-term growth despite deep volume drop
Source: Canadian Press
Published: January 15th 2009
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MONTREAL — Canada's railroads won't be derailed despite being tested
by the worst downturn since the industry was deregulated nearly 20 years
ago, industry observers say.
"We're seeing traffic drop off fairly sharply right across the board,"
says Cliff Mackay, president and CEO of the Railway Association of
A dramatic drop in volume in late November has sustained itself through
the new year. The size of the decrease should be known next week when CN
Rail (TSX:CNR) and Canadian Pacific (TSX:CP) disclose their quarterly
results, but Mackay said it exceeds 10 per cent.
The impact has been felt across most product categories, not just the
struggling forestry and automotive sectors.
It is the result of a general economic slowdown spurred by weak consumer
demand and confidence, along with dramatically reduced commodity prices
and traffic from China.
Mackay said railways will become more cautious in the short term to
preserve cash by controlling costs and maintaining customer service.
CN and CP declined to comment because they are in a black-out period
ahead of the release of their results.
The association called on Ottawa to earmark infrastructure spending in
"We think that the federal government could easily allocate a couple
hundred million dollars, if not more, to the freight-oriented part of
the rail transportation system and get a very good bang for their buck."
Projects include building more rail overpasses and underpasses.
The association has also approached the provinces to help short-line
railways whose ability to generate cash is restricted by lower revenues.
Ontario is being asked to provide $95 million. Quebec is in the process
of spending $75 million earmarked some 18 months ago.
Despite the short-term challenges, the railway sector is expected to
pick up late next year or early in 2010. RBC Capital Markets analyst
Walter Spracklin said North America's railroad industry is positioned
for long-term growth.
"Despite the current period of economic weakness, we believe that the
long-term demand for goods will grow over time and that this will lead
to steady and sustainable growth in demand for railroad transportation
services," he said in a report.
Railways will continue to gain market share from alternative forms of
transportation, Spracklin added. Its share of cross-border traffic has
grown over the past six years by about 10 percentage points to 55 per
Trucking-related challenges such as highway congestion and higher
operating costs for fuel will continue to help railways that have
improved their service and lowered costs, Spracklin wrote.
And once customers transfer to rail, they are less likely to switch back
to higher-cost trucking in an environment of economic uncertainty.
Railway freight demand is expected to increase 88 per cent by 2035 from
2002 as total demand for freight transportation nearly doubles to 37.2
billion tons, according to the U.S. Department of Transportation.
Significant pricing power, strengthened by tight capacity, gives
railways the edge as multi-year contracts help to mitigate volume
A recent study said rates exceeded seven per cent annually between 2003
and 2006, after being relatively flat between 1987 and 2003. Spracklin
expects prices will grow at a slower pace of three to four per cent in
Although some shippers have begun to protest freight rates, government
agencies are unlikely to intervene with regulations because it could
impede future company-funded infrastructure upgrades, Spracklin said.