General railway discussions

[crs1026]

So one solution may be more government oversight?

Not oversight, but certainly regulatory barriers to this kind of backing away from customers. That in turn might change the economics a little - not enough to harm current investors, but enough to discourage wealthy investors eager to exploit a temporary weakness.

Unfortunately, I am not King. So I expect that Ottawa will look on meekly while CN goes through a difficult period of retrenchment. Maybe if it gets bad enough, someone will step in.

- Paul

 

[ManyQuestions]

I had considered that routing, but is hardly a direct routing why would CN interline with 2 different railways when they have track of their own that is arguably much better. It also doesn't explain how it would "bypass the heavily trafficked Windsor rail corridor
and all its major cities, including Toronto, Ottawa, Quebec City and Montreal," as claimed by SNC in the article.

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My guess is the "Windsor rail corridor" part is a misunderstanding or a misquote and the objective is just to provide direct rail access to port in Baie-Comeau (without needing to use a ferry) and the hope is to reduce truck traffic (not rail traffic).

An article in LaPresse suggests that they are looking to access Dolbeau from Abitibi by reactivating the line from Lebel-sur-Quévillon to Chaplais and the former NTR. Specific reference to sending trains from Manitoba to Baie-Comeau.

Qc Rail | Le projet de route commerciale vers l’Europe avance

Le projet de corridor ferroviaire dans le nord du Québec qui faciliterait les exportations vers l’Europe et le reste du monde vient de franchir une étape importante avec le contrat attribué à SNC-Lavalin et Norda Stelo pour en évaluer la faisabilité.

www.lapresse.ca

 

[Northern Light]

An article in LaPresse suggests that they are looking to access Dolbeau from Abitibi by reactivating the line from Lebel-sur-Quévillon to Chaplais and the former NTR. Specific reference to sending trains from Manitoba to Baie-Comeau.

Qc Rail | Le projet de route commerciale vers l’Europe avance

Le projet de corridor ferroviaire dans le nord du Québec qui faciliterait les exportations vers l’Europe et le reste du monde vient de franchir une étape importante avec le contrat attribué à SNC-Lavalin et Norda Stelo pour en évaluer la faisabilité.

www.lapresse.ca

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From the above article (translated to English)

 

[allengeorge]

CN probably never had a serious shot at buying KCS. Its counter offer strategy may or may not have been prudent, but without doubt CN’s board would have been lambasted had they sat passively while CP swooped in to make the purchase. So they had to make a play, to demonstrate they had their hands firmly on the wheel.

This is letting CN off lightly.

The implication here is that CN’s only options were to: make a counteroffer or, face a shareholder insurrection over this deal. There were other options: CN could have stated their vision of how they would expand their business in the US and Mexico to meet these threats, they could have pointed to investments they made to improve unit economics…

CN is in this situation because they’ve failed to articulate and execute on an obviously winning strategy in the NA rail landscape. At best they’ve forced CP to raise its bid - at the expense of a board challenge.

 

[lenaitch]

From the above article (translated to English)

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That would turn QcRail into a federally regulated carrier and responsible for spending a lot of money building rail to connect gaps and upgrade as well as buying, or gaining running rights on other roads (Edit: or paying them to interchange). Not to mention they want add traffic to CN's only Canadian mainline. I wonder if they have talked to the other roads.

 

[Northern Light]

That would turn QcRail into a federally regulated carrier

I agree, it would.

Not to mention they want add traffic to CN's only Canadian mainline.

Is that true?

I don't think they're looking at a massive net gain of traffic, more a diversion.

So CN(or CP) would take existing grain-carrying trains (or the like) that currently travel down to southern Ontario, and simply route them along a new north mainline.
There would appear to be some attempt to capture freighter traffic out of Thunder Bay as well, but the grain et al. already arrives in TB by rail.
So any capacity constraint would only occur would occur where that grain continued on existing mainline track before reaching the new north mainline.

***

At least that was my perception, but perhaps I'm off.

 

[lenaitch]

I agree, it would.



Is that true?

I don't think they're looking at a massive net gain of traffic, more a diversion.

So CN(or CP) would take existing grain-carrying trains (or the like) that currently travel down to southern Ontario, and simply route them along a new north mainline.
There would appear to be some attempt to capture freighter traffic out of Thunder Bay as well, but the grain et al. already arrives in TB by rail.
So any capacity constraint would only occur would occur where that grain continued on existing mainline track before reaching the new north mainline.

***

At least that was my perception, but perhaps I'm off.

It would be a net gain if the intent is to capture traffic from TBay which use different lines but, yes, it would be a diversion if the intent was draw CN traffic from other southern Ontario and Quebec and Maritime ports since that traffic already uses the Winnipeg-Nakina portion. If the intent was also to attract traffic off CP (and the comparatively small amount that goes through Churchill) it would also be a net gain. They, or somebody, would also have to re-establish interchange facilities at Nakina, Cochrane and the Saguenay unless they intend to buy the portions in northern Quebec and Ontario or pay the current owners. Again, the current owners might have thoughts about that. I imagine, but don't know, that having your product handled by multiple carriers would seem to be more expensive.

The whole thing sounds very aspirational.

 

[Kitsune]

.. and how many communities along the former NTR want a modern freight railway blasting through the center of town? Also, a quick on google earth shows all the bridges are still standing and the track bed has held remarkably well.

 

[DirectionNorth]

From the above article (translated to English)

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This doesn't seem very realistic. I could draw an LRT down major roads, but that doesn't make it come true.

I don't see very many customers. How many are actually shipping from the Prairies to the sea? I think most goods in that general direction goes through Thunder Bay, and is there anything perishable that they produce?

 

[crs1026]

The part that is most credible to me is the section from Dolbeau to the St Lawrence. If (an assumption on my part) ore volumes are going to ramp up, a resource railway from there to the St Lawrence could be economically justified.

It’s a bit of a statement that the CN line to the same region isn’t attractive, but perhaps there simply isn’t the kind of port terminal possible within reach of CN’s existing lines. Loading more ships in Baie Comeau rather than, say, Sorel, has its merits - espcially for minerals.

The ”disrupting” value of adding a third main line from the west, competing with the two existing lines, is hugely attractive, but possibly still far-fetched . Canada has many two-supplier regimes (eg Rogers vs Bell) which offer only a partial free-market solution - with a regulatory body full of lawyers making up for the lack of a wide open competitive regime to force a balance of interest between shippers and railways. Perhaps as our economy grows, there is enough new freight to justify that third line, but it’s hard to believe that CN and CP could not add capacity to the two existing lines for less money than reactivating a third.

If the proponents think they can simply steal business away from the two existing railways, that’s a hard sell in my eyes. Neither the existing investors nor the current regulator will welcome that change. (Upstart airlines and telco’s don’t fare well in Canadian regulatory space). However, if Western shippers see more of their product being shipped through Eastern ports rather than to the Pacific, and fundamentally do not like how they are being treated to date, perhaps they have access to enough capital to make a third line a reat threat and not just a bluff.

Lastly, remember that the NTR was not build to current standards for car weight or train length, and has been abandoned for a long time. The bridges that are in place may not be reclaimable. Some parts are on rock but others are on swamp. It’s a hugely expensive proposition to build and operate all the way across the Canadian Shield. Just ask John A MacDonald or MacKenzie and Mann.

- Paul

 

[lenaitch]

I couldn't find anything that neatly portrays how much of our prairie agricultural output goes east, west and south (our domestic consumption is apparently about 20%). Grains, pulse, etc. crops aren't particularly perishable in the traditional sense, so long as they are dried and stored properly. However, they are seasonal and worldwide consumption is year-round. Since they obviously can't be shipped from producer to consumer immediately, they have to be stored, somewhere, by somebody, and that has a cost. Every stage of the process wants another stage to store it. The advantage of getting export shipments to ice-free tidewater, as opposed to Great Lakes or Upper St. Lawrence ports is that it potentially gets the product 'out the door' to offshore customers faster and reduces the need for storage capacity, turning it into more in-transit transfer storage. I know that west coast ports have faced storage capacity issues in past years but I don't know if or how much that is an eastern problem.

No doubt large handling and exporters like Cargill would support the prospects of another level of competition, but I Imagine any serious investor would be asking the same questions we are. Spending billions to (re)build hundreds of kilometers of rail line and building the handling facilities at the far end would have to be weighed against storing in existing silos waiting for the ice to go out. Each mode of transport has its own costs. One study I saw (US, related to seacans) found that rail is at least 2x the cost of marine.

The view of CRS1026 regarding the viability of the 'Quebec part' in terms of mineral export has much merit. I recall somebody (CN?) proposing a new line into northern Quebec and/or Labrador to tap the potential mineral market.

 

[ManyQuestions]

If (an assumption on my part) ore volumes are going to ramp up, a resource railway from there to the St Lawrence could be economically justified.

It's still going to be a over a hundred kilometers short from the iron railways. The Arcelor railway terminates at Port-Cartier while the IOC run line terminates in Sept-Iles. The majority of the export tonnage is currently sent along the IOC run line (QNSL) given that Arcelor is not allowing other mining companies to use their line. It's also worth noting that the majority of the ore is being sent to steel mills overseas rather than being barged up the St-Laurence. Arcelor has recently sold off their American steel mills and seem to want to sent their ore to Europe.

The 2010 CN study into building a line to Sept-Iles was done at time when the price of iron ore was at it's all time high and was halted before completion as soon as the iron market declined and it became apparent that none of mega mines being considered would get built. While there are currently ongoing expansion mine projects (including at doubling of capacity to 14Mtpa at Bloom Lake) given that the price of iron ore has in the past few months passed and then descended below its former all time high, none are anywhere close to as ambitious as those from the turn of the previous decade. At that time several companies were considering the viability of constructing an iron ore concentrate slurry pipeline instead of expanding the existing railways to the shore in order to transport their planned tonnages.

 

[lenaitch]

The other angle to the proposed route's role in resource movement could be as an alternative to ice-free tidewater for the Saguenay's proliferations of aluminum smelters. Canada mines no Bauxite. The feds are looking to divest the port facilities and Quebec is looking to keep it profitable.

 

[ManyQuestions]

The other angle to the proposed route's role in resource movement could be as an alternative to ice-free tidewater for the Saguenay's proliferations of aluminum smelters. Canada mines no Bauxite. The feds are looking to divest the port facilities and Quebec is looking to keep it profitable.

I don't want to be too negative about this project, but I don't think that it will generate much traffic beyond shipments between Europe and central/western Canada. Rio Tinto is currently spending a few hundred million to expand their port in La Baie that they use to supply bauxite to the Saguenay smelters.

As for the viability or iron ore shipments, I talked with some people from MFQ/Champion Iron today and learned that their doubling of concentrate output will increase their trains sent to Sept-Iles from one to two daily 240 car trains. There is certainly a significant tonnage of ore being sent to the port of Sept-Iles, but the vast majority of it is being sent overseas. A significant majority of the iron ore mined in this region is currently sent to steel mills in Asia and only a minimal amount is used in North America. The only ways I can see a line from Sept-Iles to Saguenay carrying a significant amount of this ore are if there is a resurgence of steel mills in inland North America or if the shipment of iron ore by rail to the west coast for loading onto ships becomes preferable to just directly loading capesize vessels in Sept-Iles.

That being said, any new construction of a mainline would be a very interesting development.

 

[lenaitch]

^ Great insights to the region and its industries. Perhaps at the end of the day, SNC-Lavelin being kept busy with public money is considered a win.