Canadian Pacific wins contract for international intermodal traffic

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CPLOGO
CALGARY, Alberta — Canadian Pacific has wrestled some international intermodal traffic away from congested rival Canadian National.

Beginning April 1, CP will begin hauling 85 percent of the Ocean Network Express traffic at the Port of Vancouver, CEO Keith Creel told investor conferences last week.

Ocean Network Express, or ONE, is the new combination of shipping companies K-Line, MOL, and NYK. CP currently handles K-Line traffic, which represents a third of the consortium’s business in Canada. CN, meanwhile, currently carries MOL and NYK containers.

CP has been trying to regain international intermodal business that it lost to CN over the past five years. CN enjoys outsized market share at the Port of Vancouver, where it has 70 percent of the container business.

But CN has been struggling to deal with faster-than-expected growth in intermodal traffic at the expanded container ports of Vancouver and Prince Rupert, B.C. This traffic, combined with growth of frac sand, grain, and other commodities, has gummed up yards, clogged main lines, and left CN short of crews and power across Western Canada.

CN executives have said they expect to handle a record amount of international intermodal traffic from West Coast ports this year and that the railway may have to turn away business from shipping lines that are adding service to Vancouver.

“We have capacity in our network,” Creel says.

The additional ONE business is worth about $80 million annually under a contract that is just under three years in length.

“It's good for ONE. It's good for their customers. It's good for our customers, absolutely. And it's won on the base of service, the service offering, the strength of this network,” Creel says.

CP shifted away from international intermodal business after the arrival of E. Hunter Harrison as chief executive and began focusing on more profitable domestic intermodal.

“We backed away from business we were not making money on,” Creel says. “We backed away from business we couldn't compete at an 80 percent operating ratio.”

Now that CP’s costs are on par with CN’s, it’s in a position to compete for lower-margin international intermodal traffic.

The ONE contract win will help boost CP’s new Ohio Valley intermodal partnership with two Genesee & Wyoming short lines. The Chicago, Fort Wayne & Eastern and Indiana & Ohio haul CP intermodal traffic between Chicago and Jeffersonville, Ohio.
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