Freight Report: Re-Exploring CPKC and CN
Reporter's Notebook: Apr. 25, 2023
Welcome Please Haul My Freight: Edition 41. Here are some items in my notebook this week:
MEA CULPA: Readers of this blog know that in “The CPKC Edition” I wrote an opinion piece about how I thought that if CPKC were to succeed, it would not be because of domestic intermodal.
The three most powerful words come next: “I was wrong.”
Never did I think Schneider would make an agreement with CPKC. I was wrong. Schneider made a deal. I was surprised. I got that wrong.
Swift Intermodal also made a deal. I didn’t see that coming either. However, I would recommend people watch how much Swift and Schneider use CPKC and in which lanes.
How much will Swift run on the CPKC 180/181 train going from San Luis Potosi to Chicago launching in mid-May? Will both Swift and Schneider supply enough business to fill an entire unit train all the way to Chicago?
The 180/181 is a daily train touching San Luis Potosi, Monterrey, Laredo, Kansas City, and Chicago, but will there be enough volume to run seven days per week in both directions?
Perhaps there are other shoes to drop. Other smaller IMCs, either asset or non-asset based jumping on board too.
Swift was clear with me that while Union Pacific will lose some Mexico-US volume, it will not put all its intermodal eggs into either basket. UP retains some Mexico-US intermodal biz, and CPKC gets some Mexico-US intermodal biz, too. The Swift source said it’s all based on the competition: who provides the best service for Swift?
Bottom line: I was wrong. But I’m humble enough to admit when I’m wrong.
CN-UP-FERROMEX RESPOND: The CPKC rivals responded on Monday. Canadian National-Ferromex-Union Pacific Railroad unveiled its own Mexico-US-Canada option on Monday called Falcon Premium.
The southbound train will run daily while the northbound train will run Monday to Friday, according to the schedule.
What also stands out is that Union Pacific seems like a bridge carrier. The schedule includes a bunch of stops in Canada and two in Mexico, so great news for the shippers in Canada and Mexico, but I’m not seeing UP’s role outside of moving containers between Chicago and Eagle Pass, Texas. What is UP’s role beyond the interchange in UP Yard Center or CN Harvey?
READY TO RUMBLE: What are the pros and cons of each network?
CPKC ADVANTAGES: It has Schneider and Swift. Private boxes are now available on the network. For a shipper moving loads from San Luis Potosi or Monterrey to Chicago, this is the only single-line train available. While Ferromex interchanges with BNSF and UP in Eagle Pass every day, there are always potential delays when a train is handed off between two railroads. There is an advantage to a single train with no exchanges. Single trains are always better.
CPKC DISADVANTAGES: The lingering question is transit times. CPKC claims it can run from Laredo to Chicago in 72 hours. But will that hold up in the real world? The tests appear to have been done with no other trains along the route, significant locomotive horsepower, perfect crew changes, and green lights all along the way. That’s not real life. Our world isn’t open roads, perfect weather, and green lights everywhere. I hope 72 hours is consistently attainable because shippers will be the winners, but some very smart people are skeptical that 72 hours is a realistic number. The facts are that UP’s route to Chicago is fewer miles. In general, fewer route miles mean faster transits. Finally, CPKC does not have a single train to Detroit or Eastern Canada. CPKC’s terminal in Detroit is too small to run a direct train today.
CN-UP-FERROMEX ADVANTAGES: This partnership harnesses the advantages CN and UP can deliver over CPKC. UP’s route is fewer miles between the Texas border and Chicago. All things being equal, fewer miles equals faster transits. If CPKC cannot hit 72 hours consistently, then mileage matters. CN’s advantage is Detroit-Sarnia-Canada. The CPKC cannot offer a single train to Detroit because CPKC’s terminal in Detroit is the smallest in the network, nor a double-stack, high-cube train through Windsor. CN has a better footprint in Detroit and a double-stack option through Windsor via Sarnia. CPKC goes across CSX Buffalo, so CN has an advantage through the Michigan border. That’s a plus for shippers in Detroit, Brampton, and Montreal.
CN-UP-FERROMEX DISADVANTAGES: If I’m in Detroit, Brampton, or Montreal, my container is traveling on three trains to Monterrey. There are technical ways to block swap, locomotive share, and other PSR ways to expedite interchanges, but it’s a handoff. It may be faster and more seamless to dray a box between Chicago and Detroit to avoid complications in UP Yard Center or CN Harvey. CN is confident that the handoffs will be seamless between UP Yard Center and CN Harvey, but that remains to be seen. Like CPKC transit times, I hope that the UP Yard Center and CN Harvey handoffs are seamless because the shipper is the winner. Plus steel-wheel interchanges and single-line trains are better for the environment than trucking. The disadvantage of Ferromex is that it serves fewer Mexico markets than CPKC in certain regions. Two intermodal sources have also told me that the CPKC Laredo interchange point is better than Ferromex in Eagle Pass, Texas. As CPKC builds a second bridge across Laredo, the gap might widen between Laredo and Eagle Pass as a preferred crossing.
THE J.B. HUNT-BNSF OPTION: Don’t forget we have a powerful third option. BNSF Railway and J.B. Hunt via a CPKC interchange in Robstown, Texas. The J.B. Hunt advantage is clear: boxes, boxes, boxes. J.B. Hunt has more containers than anyone. J.B. Hunt can provide the containers no one else can. BNSF’s route between Texas and Chicago is pretty close to UP on route mileage, so the transit times tend to be pretty close to Chicago. For Detroit shippers, J.B. Hunt has the truck power to dray boxes between Chicago and Detroit pretty seamlessly. If shippers prefer trucks over a steel-wheel interchange in Yard Center or Harvey, then options such as J.B. Hunt are attractive. If the steel-wheel interchange is seamless, then CN will be very competitive.
Ultimately, as one source pointed out to me, “It’s all about the execution.”
A REMINDER: We have launched our quarterly surveys asking shippers and intermodal providers to nominate who they think is doing the best job in intermodal. For IMCs, we want to know, who is the best railroad in your opinion? For shippers, we want to know, who is the best intermodal partner. Is it J.B. Hunt? Is it Hub Group? Is it Swift or Schneider? Is it STG? Or another IMC?
Think of it as Angie’s List-Home Advisor meets Amazon Reviews for intermodal. Who gets a 5-star rating? Who gets 4 stars? Who gets only 1 or 2 stars?
Click the button below to e-mail me for details on participating anonymously.
SAVE THE DATE: Everything we talked about here will be part of our conference in Chicago. The Journal of Commerce Inland Distribution Conference is Sept. 25-27. There will be several intermodal sessions, including on Mexico-US-Canada. Click here for more details.
Any opinions in this blog represent the author’s views, not the Journal of Commerce or S&P Global. Any rumors in this notebook are just that: rumors. Unconfirmed. Not news stories.
Do you have an opinion or a subject you’d like me to cover? Email me ari.ashe@spglobal.com to send your thoughts.
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