Canadian Pacific Railway’s decision to drop its pursuit of a Norfolk Southern Corp. merger is a missed opportunity for more than the two North American transportation giants. It’s an opportunity lost for Canadian goods movement to increase efficiency and expand trans-continental capacity at a time when the country’s rail links need more of both to handle Canada’s growing trade flow.
As CP CEO Hunter Harrison pointed out April 11, North America’s railway industry needs to consolidate to meet that demand. But, with Norfolk’s rejection of numerous CP offers, Harrison conceded in the statement announcing his company’s sidelined merger initiative that there was no clear path to consummate that union.
Done right, the merger, which would have created North America’s biggest railway, could have delivered operational efficiencies for both railways and their customers.
For CP, it offered diversification from commodities reliance and access to the rich U.S. consumer heartland. For western oil producers stranded in a land of anti-pipeline fever, it would have provided direct rail links to eastern refineries. For shippers, it offered a coast-to-coast North American network that would have helped avoid major rail bottlenecks like Chicago.
Canada and the rest of North America need all the help they can get in reducing those bottlenecks.
As the Conference Board of Canada details in its recently released Building for Growth: Trade, Rail, and Related Infrastructure report, rail volumes in Canada through 2025 are expected to grow faster than they have since 2001 with the annual payload of commodities shipped via rail predicted to increase to 260 million tonnes compared with 200 million in 2011.
The rail corridors between the Prairies and the U.S. and the Prairies and B.C. are forecast to enjoy the greatest growth during the period.
But expanded trade won’t occur nor will the country reap the economic benefits from it unless rail and other goods movement infrastructure lead the way in opening up more efficient continental transportation corridors.
