Canadian National Railway’s acquisition of Iowa Northern Railway won’t likely shake up the grain shipping industry in Canada.
“I cannot see any advantage to the Canadian grain trade in this purchase,” said Mark Hemmes, of Quorum Corp., Canada’s grain monitor.
CN’s acquisition of the Waterloo, Iowa., rail company was announced Dec. 6 and is pending a regulatory review by the United States Surface Transportation Board.
Earlier this year, the STB approved Canadian Pacific Railway’s US$31 billion acquisition of railroad company Kansas City Southern. That merger saw the sixth and seventh largest railroads by revenue in the U.S. combine forces and saw CP’s North American network rise to 32,000 kilometres from 26,000 km. The approval took two years, and the final merger had major implications across Canada, the U.S. and Mexico.
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CN’s IANR acquisition is comparatively small.
IANR is a Class III short line and operates about 445 km of track, all within Iowa. Overall, CN’s North American network spans almost 30,000 km.
Hemmes said the IANR deal makes strategic sense for CN.
“It does help the U.S. grain trade as they now have direct access to CN’s lines south to the Gulf (Mobile, Alabama, and the Louisiana ports). It was a smart move for CN and their U.S. side of the business.”
CN could not be reached for comment, but in a media release, Tracy Robinson, president and chief executive officer at CN, said the merger would benefit their customers.
Hemmes said benefits to Canadian customers are likely limited, and the deal is more about enhancing CN’s U.S. network.
“Iowa is predominantly corn, so they would be serving the ethanol and feed business,” he said.
“The Canadian cattle industry has been buying a lot of U.S. corn the past couple of years, and CP has been doing some good business hauling it up here, so that may provide some alternate sourcing, but it won’t be a lot.”
