Grain sector closely watching CN service network

Canada’s grain supply chain has managed to avoid any major service disruptions since the disastrous 2013-14 grain shipping season when system-wide congestion slowed export grain movements to a trickle.

However, there are troubling signs that rail service in Western Canada may be losing traction, a scenario that has shippers and commodity groups nervous.

“There are some concerns, particularly with CN,” said Wade Sobkowich, executive director of the Western Grain Elevators Association.

“We’re starting to see longer dwell times and slower movements on CN’s network. People are nervous that there’s going to be issues … that could last a long time if they aren’t addressed quickly.”

Dwell times are the amount of time that loaded grain trains sit at country elevators before being moved.

At the same time, on-time car order fulfilment rates — the rate at which hopper car orders are filled and empty cars delivered to country elevators — has been declining.

Data from the Ag Transport Coalition suggests that Canadian National Railway’s car order fulfilment rate dropped to 68 percent in Week 11 of the 2017-18 crop year and 51 percent in Week 12.

Over the past year or more, CN’s order fulfilment rate has generally been in the 80s or 90s.

“That’s concerning,” said Sobkowich.

“Most of the car orders that have been delayed are being filled the next week, so it’s not an extreme situation yet.… Having car order fulfilment delayed by a week is one thing, but if that slips to two weeks, then three weeks and then orders start getting cancelled outright, then we could quickly end up in a pretty tough situation that lasts for the rest of the crop year.”

Compounding concerns is the fact that some long-term forecasters are calling for extreme winter weather conditions that are not conducive to efficient railroading operations.

WGEA members are encouraged by the fact that CN has acknowledged that there have been service issues on its network, Sobkowich said.

He also conceded that a recent derailment on CN’s mainline near Wainwright, Alta., has complicated the railway’s recovery efforts.

“CN is aware of the fact that they aren’t meeting the industry’s needs right now and they’re bringing on, as quickly as they can, additional power and additional crews,” Sobkowich said.

“We’re still cautiously optimistic that they’ll be able to recover in the next few weeks, but if they don’t, we could be in a position where we’re not able to recover for some time.”

Greg Northey, a spokesperson for the Ag Transport Coalition’s rail monitoring program, said the coalition began to notice performance issues on CN’s network in mid- to late-September.

Demand for hopper cars on CN’s network has been slightly higher than expected, but it is still roughly in line with last year’s demand, he added.

“There’s been an uptick on (car) rationing on CN’s network, or what we would call cancellations,” Northey said. “The volumes (demand) are pretty well the same as last year, maybe slightly higher, but we’ve been seeing more rationing, so that was a red flag to us, and it began around Week 6 or Week 7 (of the 2017-18 crop year).”

Northey said CN has been “quite good” in the past at recovering from car supply shortfalls.

He said demand from other business sectors including potash, intermodal and frack sand has been heavier than expected and may have contributed to service reductions to the grain industry.

David Przednowek, CN’s director in charge of grain marketing, said Nov. 3 that a number of factors have affected CN’s ability to supply hopper cars to the grain industry.

For starters, demand for hopper cars has exceeded the “maximum sustainable capacity of the supply chain.”

“Typically, the guidance to the industry is that if everything is fluid — if the ports are working and there’s no weather issues — then the supply chain as it pertains to CN can handle around 5,500 (cars) a week,” Przednowek said.

“We’ve been getting demand in some weeks around 6,500 so demand is exceeding … available capacity.”

Przednowek also pointed to unloading delays at certain west coast grain terminals, which have reduced weekly capacity even further.

The Week 11 derailment at the Fabyan Trestle Bridge near Wainwright presented a significant challenge to CN, he added.

Przednowek said CN has been responding to a “significant uptick” in demand from other sectors.

The company has taken steps to deploy more crews and more locomotive power.

ATC data released Nov. 7 shows that the CN car order fulfilment rate for Week 13 improved to 66 percent, resulting in unfulfiled shipper demand of 1,649 hopper cars.

Canadian Pacific Railway supplied 93 percent of the cars ordered in Week 13, resulting in unfulfiled shipper demand of 318 cars.

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