CP, CN renewing grain hopper fleets after backlogs
Canada’s two railways are investing hundreds of millions to purchase new hopper cars, a move farmers say is a positive step toward improving grain movement after a season that saw a massive backlog of shipments.
Canadian Pacific Railway Ltd. announced Thursday that it plans on investing more than $500 million to purchase new high-capacity grain hopper cars, with 500 expected to come into service before year’s end. The initial order is for 1,000 cars from Hamilton’s National Steel Car Ltd. It plans on ordering about 5,900 cars in total over the next four years to remove all the low-capacity cars in its fleet.
The investment comes two weeks after rival Canadian National Railway Co. announced it planned to acquire 1,000 new cars from National Steel Car over the next two years to improve its aging fleet. It is part of the railway’s capital spending program that will see it invest $3.4 billion this year.
Both railways said the investments were made possible by the passage of Bill C-49, the federal government’s Transportation Modernization Act, which included a provision that changed the Maximum Revenue Entitlement formula. Under the previous legislation, the rail companies had to share credits under the MRE formula for making such purchases.
“We know farmers depend on us to transport their product efficiently, safely and reliably to market,” CP’s chief executive Keith Creel said in a statement. “It’s the largest sector of CP’s business by revenue, and we’re committed to continuous improvement for the benefit of our customers and the North American economy.”
Jeff Nielsen, president of the Grain Growers of Canada, said the purchases are a good start to improve the railway ’s ability to efficiently move shipments of grain, which drastically deteriorated this year, in part due to a capacity crunch and harsh winter weather.
“We need to maintain our international reputation as a supplier, because that has been damaged and tarnished,” Nielsen said.
Kevin Bender, the Alberta Wheat Commission chair, said the new cars will provide some crucial efficiencies when it comes to moving grain. CP said the new cars are shorter and lighter than the existing fleet, and will be able to handle 15-per-cent greater volume and 10-per-cent greater load weight than its old cars.
Financial Post