THEY WERE CAUGHT OFF-GUARD WITH THE SURGE IN VOLUMES.

Halliburton blamed CN last week for halting new shipments of sand needed to produce oil and gas from shale formations through hydraulic fracturing. The delays across a wide section in Minnesota and Wisconsin are expected to last a week.

The railway cited higherthan-expected demand for fracking sand, as well as “brutal” weather and congestion on the tracks. The first quarter “will be challenging,” chief financial officer Ghislain Houle said at an investor conference Feb. 13.

To be sure, CN’s resilience and efficiency should enable it to bounce back before too long, said Keith Schoonmaker, a Morningstar analyst in Chicago.

“Yes, we will see a few quarters of challenges, but CN still has a very productive network,” he said. “Too much demand is a much better problem to have than if your volume goes away — which is what we see happening with the coal business at the U.S. rails.”

But in the short term, service yardsticks underscore the hurdles for CN.

Operating ratio, a widely watched measure of efficiency that compares expenses to revenue, worsened almost four percentage points to 60.4 per cent in the fourth quarter. For all of 2017, both Canadian railways reported 57.4 per cent — the first time in more than 20 years that CN hasn’t topped its Calgarybased rival, Canadian Pacific.

Through the first six weeks of 2018, average train speed at CN has dropped about 17 per cent year-over-year, according to an analysis by Bloomberg Intelligence based on data compiled by the Association of American Railroads. That’s considerably worse than the 0.6-per-cent average increase reported by the railroad’s peers. Dwell time — the average time railcars spend idle — increased 43 per cent at Canadian National, compared with 2.3 per cent for the rest of the group.

CN has said it won’t be able to start expanding its network before the end of the winter. That’s pushing some shippers into the arms of CP, said RBC Capital Markets analyst Walter Spracklin, who recently surveyed customers of the railroad.

Automakers and grain producers are among a group of shippers who either plan to move some of their business to CP or have already done so, he said in a note to clients last week. He didn’t identify customers by name.

In a statement Monday, Emerge Energy Services said its Superior Silica Sands unit is increasing shipments of its fracking sand on BNSF Railway Co., the railroad owned by Warren Buffett’s Berkshire Hathaway Inc. Emerge Energy cited the “service pause” on CN in explaining its actions.

“Service issues deteriorated,” Spracklin said of CN. “Is there irreparable damage to the shipper relationship? Our view is yes.”