Canada Markets

Ahead of the results of this week's strike vote by Canadian Pacific workers, we see continued improvement in overall performance by Canada's two major railways.

In week 41, both railways spotted 88% of the cars requested for loading in the country, the highest level of performance seen in 20 weeks and in the top 20% of all shipping weeks this crop year. This is noted by the blue line on the attached graphic, which is staging a V-shaped recovery since reaching a low of 32% in week 30.

After a dismal winter shipping season that saw just 17% of the cars order spotted for loading in the country for loading by CN in weeks 29 and 30, the company spotted 92% of the cars wanted in week 41, the company's best performance seen since week 3. CP spotted 84% of the hopper cars wanted for loading, its best performance seen in 19 shipping weeks.

The brown line represents the outstanding orders, which reached a low of 1,673 cars as of week 41, the lowest level reported since week 23, well below the week 30 high of 5,382 cars while having fallen by 1,941 cars over the past three weeks.

The grey line represents the canceled or "rationed cars" since the beginning of the crop year, which has recently stabilized at 22,567 cars, which represents a lost opportunity for prairie producers and shippers. This number is comprised of 22,243 cars cancelled by CN Rail, or 98.6% of the total, and 324 cars by CP Rail. It's interesting to note Ag Transport Coalition's statement that CN's cancelled cars are six times the number of cars the company cancelled in the 2016/17 crop year. This has taken place when overall demand for hopper cars of 349,765 cars as of week 41 is just .6% below the number ordered by shippers over the same period in 2016/17.

This level of performance comes just days ahead of the results of the CP workers' strike vote, primarily Teamsters Union members, that ends at noon Eastern Time on May 25, also known as "Judgement Day" by the Teamsters Union. According to the media, results should be known soon after, while a rejection of CP's latest offer is hoped to lead to a continuation in negotiations according to the Teamsters. "Avoiding a work stoppage will depend on if the company would then start negotiating seriously," a Teamsters spokesperson told the Canadian Press.

An interesting opinion piece in the National Post on Wednesday indicates that the Canadian Parliament is expected to pass Bill C-49 to modernize the Canada Transportation Act in the next week, to the detriment of the mining industry. The piece titled "Ottawa Just Tied Canadian Miners to the Tracks of a Railway Duopoly" stated that the hardships faced by the grain industry received "extensive media coverage," although grain makes up little more than 10% of total rail volume. It is suggested that help for the grain sector is on the way while mining and other shippers will continue to face hardships, with mining said to represent roughly 50% of rail volumes and revenues.

Throw into the mix a growing oil-by-rail movement and competition for service will be a factor for years to come. It is likely that Parliament will also receive royal assent for Bill C-49 this week, which increases foreign ownership limits for Canada's airlines and railways. Foreign ownership limits will increase from 25% to 49%, while the individual ownership limit for CN is being raised from 15% to 25%. Bill Gates currently holds a 15.9% stake in CN between his companies, while this stake will soon increase with the passing of the bill.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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