Canadian Pacific RailwayChuck Stoody
Canada's two largest railways are optimistic that a boom in container shipments isn't just a blip.
Even though North American economic growth is slowing, the market has been bustling for "intermodal" freight, or goods transported inside standardized metal containers that are readily transferred between ships, trains and trucks.
"Our intermodal franchise is an important growth engine for us," said Kathryn McQuade, chief financial officer at CP Rail "Everyone has been pleasantly surprised with the speed of the recovery in this segment."
CP has enjoyed a 15-per-cent jump in international intermodal shipments so far this year, spurred by imports and exports at Port Metro Vancouver, Ms. McQuade said during Dahlman Rose & Co.'s global transportation webcast Wednesday from New York.
Robert Noorigian, CN Rail vice-president of investor relations, said the country's largest freight carrier is also doing brisk business in transporting containers, which carry everything from running shoes to consumer electronic goods.
"Our intermodal business is running ahead of where it was in 2008 and clearly ahead of where it was in 2009," Mr. Noorigian said, noting that CN is doing well at B.C. ports in Vancouver and Prince Rupert.
Container traffic at Calgary-based CP and Montreal-based CN rose an average of 20.6 per cent in the first eight months of this year, compared with the same period last year, according to the Association of American Railroads. U.S. railways are also benefiting, with container shipments up 16.8 per cent in the January-to-August period.
Steven Hansen, a Vancouver-based analyst at Raymond James Ltd., paid a visit recently to Port Metro Vancouver. "I can actually see the port's cranes from my window, and it has been very busy. Railways and the transport sector tend to be generally good barometers for the state of the overall economy," he said in an interview.
Analysts and rail executives caution that the economy will be volatile for the next couple of years. While there has been weakness in global shipments of raw materials such as coal, grain and iron ore, the long-term trend is encouraging for a sturdy market for containers carrying consumer goods.
"Seaborne container traffic continues to hit Canadian and U.S. shores at a blistering pace," Mr. Hansen wrote in a research report. "The volume surge has been so furious, in fact, that global container shortages have surfaced, transpacific shipping rates have spiked, and intermodal rail volumes have demonstrated a sharp upward trend."
Some North American economic data has been lethargic, but Mr. Hansen played down concerns that the surge in container traffic is due to retailers overestimating future demand from customers. While a U.S. tax credit for first-time home buyers is expiring Sept. 30, there is the ripple effect of those consumers buying "new furniture, fixtures and other household items," many of which are manufactured in China.
"Consumer spending is gradually recovering, and economic growth, while slowing, remains on sound footing," he said.