CP’s intermodal future narrows on domestic with Yang Ming loss!
President and Chief Operating Officer Keith Creel said international business growth is welcome but, “we’re not going to bet the farm on it.”
CP still has the Canadian rail transport contracts for Hapag-Lloyd, China Cosco Shipping, Hyundai Merchant Marine, and “K” Line, according to a source close to the matter who requested anonymity. Canadian National Railway, the larger of the two Class I railroads, handles the rest of ocean carriers’ Canadian business, including contracts with APL and Mitsui O.S.K. Lines that it secured in 2013 and its contract with OOCL secured in 2014. CP declined to provide additional details on its liner contracts. CN did not immediately respond to a JOC.com inquiry on the matter.
CP’s network remains at a geographic disadvantage for winning container line contracts, as the railroad does not serve the major Canadian ports of Halifax and Prince Rupert. Instead, CN is the sole rail provider at those ports, both of which are used by not just Canadian shippers but US ones wanted alternatives to the US Midwest. Creel highlighted that domestic intermodal business has always been CP’s strongest suit and, despite headwinds in demand, that remained so in the fourth quarter.
CP’ international intermodal revenue rose 7 year-over-year percent to C$150 million ($113 million). Domestic intermodal revenue, meanwhile, was up 3 percent to C$187 million. Together, CP’s intermodal business helped contribute to a strong fourth quarter for the railroad, which posted a 20 percent year-over-year jump in profit to C$384 million.
Creel said the railway expects to see solid, if mild, volume growth in the year ahead. His was a cautious tone, but still far more optimistic than the railroad’s forecasts in late 2015 and early 2016 when intermodal volume, even CP’s prized domestic business, was suffering.
The Calgary-based railway is the second North American railroad that reported better-than expected business in the last three months of 2016. CSX Transportation on Wednesday also reported gains in intermodal business on improving economic factors, highway-to-rail conversions, and optimism ahead of the regulation-averse Trump administration taking control Friday.
CP and CSX’s fourth-quarter performance may be a sign the Class I rail industry may have at last bucked the so-called “freight recession.” If true, shippers could be in store for stronger pricing in the year ahead.
Like CSX, even during the height of the freight recession last year, CP executives told shareholders they were dedicated to keeping prices ahead of inflation rates, which they now peg at 1.8 percent.