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Jun 22, 2020

Eastern ports risk falling behind if capacity isn’t increased: CN CEO

Why Canada needs more port capacity: CN Rail CEO


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The chief executive officer of Canada’s biggest railway says capacity at the country’s eastern ports needs to be increased or else Canada risks falling behind other countries as the pandemic accelerates certain shifts in the global economy.

Canadian National Railway’s Jean-Jacques Ruest says global shipping companies are increasingly utilizing bigger ships, leading to a need for more rail capacity at import terminals to ensure container loads aren’t left dwelling at the ports.

“These bigger ships are more productive, lower cost and become much more competitive on price so in order to accommodate what’s happening already in the last decade in the ocean, you need to do the same thing on the land side. You need ports that can receive bigger ships and you need rail infrastructure at these ports that can accommodate these bigger ships,” he said in an interview with BNN Bloomberg’s Amanda Lang Monday.

Port capacity has improved in Western Canada but improvements on the east coast are still lagging, Ruest said.

“It’s a question of increasing port capacity or to make them more modern with technology that didn’t exist ten years ago. And in some cases, to invest in ports that have deeper water which is what Halifax, Quebec City and Montreal offer,” he added.

The pandemic has led to a faster transition in manufacturing away from China to other Asian countries such as Vietnam, and Ruest says it makes more sense to ship those containers to Canada’s east coast via the Suez Canal. 

Within Canada, the services sector has also overtaken manufacturing in eastern provinces, so rail infrastructure needs to reflect these new realities.

“The eastern network is running at, say, 50 per cent capacity. It needs to be repurposed and focused on providing a service to consumer spending and especially the U.S. mid-west which is a part of North America that we can very easily access by the CN network,” he said.

However, Ruest says judging by his own experience with rail volumes, which are sometimes used as a proxy for economic health, he isn’t expecting the sharp rebound in economic activity that some market participants are anticipating, but rather a slower, more gradual return to growth.

“Nothing like a ‘V’. The visual that we use right now is the ‘Nike logo.’ So it came down very fast and recovery will be quite progressive and potentially quite slow,” he said.