CALGARY, Alberta — Canadian National Railway’s $220 million investment in its Calgary area logistics park, which opened a year ago, is a case study in how intermodal is paying off for Canada’s largest railroad.
The busy gates and positioning near a growing metropolitan area helped drive CN’s intermodal volume up 8 percent year-over-year in the fourth quarter.
Evidence of robust activity is abundant. Construction of a facility adjacent to the terminal for an unidentified tenant has begun, suggesting the railroad’s attempt to attract shippers to the Calgary Logistics Park is taking hold. The park has a potential for more than 2 million square feet of warehouse space, and the demand for distribution in the greater Calgary region is increasing due to a growing population driven in part by the energy boom.
Traffic is brisk at the terminal, in terms of volume and the speed with which trucks can move in and out of the facility. The latter was less the case at the previous site. Roughly 65 trucks move in and out of the site daily, with CN targeting a 45-minute turn time, said Chris Kyte, CN senior manager of Intermodal Western Canada. Average turn time last year at the terminal was 41 minutes and two seconds.
The CN terminal, located in Conrich, Alberta, handled roughly 226,000 units last year, compared with 185,000 units handled by Canadian Pacific Railway’s Calgary terminal.
Intermodal volume gains at CN boosted intermodal revenue last quarter by 11 percent to $497 million and lifted full-year intermodal revenue 8.7 percent to $1.9 billion in 2013. The growth helped propel the railroad’s fourth quarter profit up 4 percent to $568 million. The railroad saw its full year profit slip 2.5 percent to $2.3 billion, despite revenue expanding 7 percent to $9.4 billion.
Despite a severe winter, the railroad kept its title as the most profitable North American railroad with an operating ratio of 63.4 percent, defined as operating expenses as a percentage of revenue. Profitability took a slight hit, as the ratio rose 0.5 percentage points from the same period in 2012.
“CN sees good opportunities in 2014 in a number of markets, including intermodal, oil- and gas-related commodities, Canadian and U.S. grain, and commodities related to the recovery in the U.S. housing market,” President and CEO Claude Mongeau told investors yesterday.
CP’s intermodal strategy is taking shape on a number of fronts, ranging from terminal expansions and faster services, such as on the Toronto-Alberta leg. The railroad has also aggressively worked with agricultural shippers to harness the potential for match-backs, where containers used for imports are transferred to exporters for outbound use. Through its partnership with Indiana Rail Road, CN connects midwestern exporters with Port Metro Vancouver and the port at Prince Rupert.
The improved intermodal network was a factor in helping CN grab contracts with container lines APL and MOL last year from archrival Canadian Pacific Railway. CN has also gained a contract with OOCL from CP, suggesting that CN will see another volume bump this year.
But CP is far from rolling over in the fight for intermodal. CP CEO and Director E. Hunter Harrison has targeted domestic intermodal as one of the two biggest drivers for the railroad this year, and he told investors the company has already gained market share.