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12
FREIGHT
TRANSPORTATION
Rail Transportation
The Canadian operations of both CN and CPR experienced a drop
in output in 1998. CN registered 154 billion revenue tonne-kilometres,
compared with 161 billion in 1997. CPR's revenue tonne-kilometres
dropped by 2.6 per cent to 115 billion. Class II carriers, on the
other hand, in aggregate, experienced an estimated six per cent
increase in output, with 29.9 billion revenue tonne-kilometres
in 1998.
As mentioned in Chapter 10, Class I railways are generally
defined to include CN and CPR, as well as VIA Rail Canada.
Class II railways include those known variously as regional and
shortline railways.
CN and CPR both reported increased output for their systems
(Canadian and US operations) in 1999 relative to 1998. CN's revenue
tonne-kilometres reached 210 billion, up from 202 billion in 1998
(including Illinois Central output). CPR reported 146 billion
revenue tonne-kilometres, up from 140 billion in 1998.
Output for Canadian operations in 1999 is expected to be close
to 1998 results. Estimated output of Canadian operations
in 1999 is 152 billion revenue tonne-kilometres for CN and 114
billion revenue tonne-kilometres for CPR (based on three quarters
of data on Canadian operations and four quarters of system data).
Rail Traffic -- Trade with the US
From 1997 to 1998, rail imports from the US grew by 4.6
per cent, while rail exports to the US grew by 5.2 per
cent.
Exports
Exports reached 56.1 million tonnes in 1998, up from 53.4 million
tonnes in 1997. As shown in Table 12-1, all commodity sectors,
except automotive and chemical, saw increased export flows. Almost
half of the growth took place in the forest products sector, where
traffic to the US increased by 1.4 million tonnes. New Brunswick
alone almost doubled its forest exports to 1.1 million tonnes.
Other large increases took place in Alberta (coal and forest products),
British Columbia (grain), Nova Scotia (forest products), Ontario
(cement, liquid petroleum gas, gasoline and other fuel, and forest
products), Quebec (chemicals) and Saskatchewan (potash).
Shares of exports by province in 1998 were virtually unchanged
from 1997. Ontario accounted for 29 per cent of rail exports
by tonnage, while Alberta, British Columbia, Quebec and Saskatchewan
each accounted for between 15 and 19 per cent. Shares of exports
by value were also unchanged. Ontario exported 63 per cent of
goods by value, followed by Quebec with 15 per cent and British
Columbia with eight per cent.
Rail tonnage exported from Alberta declined by just over one
per cent in 1998, and reported exports from Newfoundland (mostly
ores and mine products) declined by over 70 per cent. British
Columbia, Quebec and Saskatchewan saw only small increases in
exports, while exports from each of Ontario and Manitoba rose
by about nine per cent. The largest relative increases were in
the Maritime provinces. New Brunswick, Nova Scotia and Prince
Edward Island respectively exported 75, 91 and 133 per cent
more in 1998 than in the previous year. In each of these three
provinces, forest products were the major source of increased
export trade.
Imports
Rail imports reached 15.4 million tonnes in 1998, up from 14.8
million tonnes in 1997. Table 12-1 shows that there were slight
declines in the imports of agricultural and food products (other
than grain) and forest products in 1998. The automotive, metals
and manufactured goods sectors had a sharper decrease in imports.
Increased imports were recorded from 1997 to 1998 for chemicals
(plastics and rubbers), ores and mine products (mostly stone and
limestone), grain, gasoline and fuel. The 50 per cent increase
in petroleum imports is due to traffic from the US North East
into Ontario.
According to trade import data, which records provinces of
customs clearance, Ontario's share of total imports by tonnage
dropped from 53 per cent in 1997 to 48 per cent in 1998.
Quebec's share was fairly steady at just under 15 per cent,
while British Columbia's share nearly doubled to 12.5 per
cent.
Share of imports by value was mostly unchanged in 1998,
except for a three per cent shift from Ontario (69 per cent
of total imports) to Alberta. Other than Quebec and Alberta, with
12 and eight per cent of imports by value, respectively,
all other provinces recorded steady shares of fewer than
five per cent.
Of all the provinces, British Columbia showed the largest increase
in imports by rail, with 75 per cent more tonnes brought in (cleared)
in 1998 than in 1997 (mostly stone and limestone). Alberta, Manitoba,
New Brunswick and Quebec also showed import increases of about
ten per cent or more. Ontario, Saskatchewan and Nova
Scotia showed a decrease in imports of about 5, 24 and 27 per
cent, respectively.
Rail Traffic -- Overseas Trade
A significant amount of rail traffic each year consists of shipments
to and from marine ports. In 1998, this traffic accounted for
about 115 million tonnes of goods shipped by rail.
Rail--Marine Exports
In 1998, Class I railways carried 72.1 million tonnes to Canadian
port facilities for export. Approximately 79 per cent of
these shipments were made up of bulk products, including coal
(33 million tonnes), grain (20 million tonnes), potash (4.3
million tonnes) and sulphur (2.7 million tonnes). A further
9.3 per cent was accounted for by mixed commodities shipped in
intermodal units (4.5 million tonnes) and forest products
(2.2 million tonnes). Of all goods carried to marine ports, 1.8
million tonnes originated in the US, and 95 per cent of these
were in intermodal units.
In addition to these rail-marine exports, the iron ore railways
in Labrador and Quebec sent about another 34 million tonnes
to export positions along the St. Lawrence River.
Rail--Marine Imports
Class I railways brought about 7.1 million tonnes of goods
inland from Canadian ports in 1998. Approximately 5.2 million
tonnes of mixed commodities in intermodal units, together with
1.1 million tonnes of phosphate rock, accounted for 89 per cent
of these shipments by weight. Of the intermodal tonnage,
about 36 per cent continued on to destinations in the US, while
Ontario and Quebec were the destinations for 2.1 million and 0.8
million tonnes, respectively. The phosphate rock shipments originated
entirely from the Port of Vancouver and were sent to destinations
in Alberta.
Rail Traffic -- Commodity Sectors
Rail traffic classified by commodity sectors - including grain,
fertilizers, ores and mine products, coal, forest products, industrial
products and intermodal products - made up 97 per cent of rail
traffic in Canada in 1999. Flows in the first three commodity
groups declined from 1998 levels, while the other four groups
(especially coal and intermodal) saw increased traffic. Total
traffic rose in 1999 to 260 million tonnes, up from 257 million
tonnes in 1998. Figure 12-1 shows the total monthly commodity
loadings by rail from 1997 to 1999.
Grain
In 1999, with the continued overabundance of grain on world
markets, grain traffic was about six per cent lower than in 1998.
Total annual tonnage was 26.5 million tonnes, down from 28 million
tonnes in 1998. Figure 12-2 shows three years of grain loadings,
including 1997's bumper crop.
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STAKEHOLDER CONSULTATIONS ON GRAIN TRANSPORTATION
SYSTEM RESTRUCTURING |
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In a May 1999 policy statement, the Minister of Transport
announced that the federal government agreed with Justice Estey's
vision for the system. At the same time, the Minister appointed
Mr. Arthur Kroeger to seek consensus among all major system participants
on the changes necessary to implement the 15 point reform framework
set out in 1998 by Justice Estey.
A Steering Committee made up of 14 stakeholder groups managed
the process, while 3 Working Groups -- Rates and Revenues, Commercial
Relations, and Competition and Safeguards -- dealt with the technical
aspects of implementing each recommendation. Consensus was reached
on a number of issues; however, on some important subjects, it
was impossible to bridge the divergent views. The following is
a summary of the report's conclusions.
- On the legislated ceiling for rail freight rates charged
for transporting grain, consensus was reached on many technical
details tied to a revenue cap but not on its initial level or
on how to treat future railway productivity gains. The Steering
Committee concluded that tariff details should:
- be delimited between shippers and railways;
- be tied to needs;
- be distance-related, with exceptions recognizing and encouraging
efficiencies;
- differ with differences in service;
- be transparent and non-discriminatory without precluding the
use of confidential contracts; and
- permit seasonally and commodity-specific discounting. It also
concluded that there was a need for measures to address concerns
of captive shippers.
- On the questions of railway competition and safeguards a
number of options were developed to be presented to the government.
These included:
- the implementation of an open access plan;
- enhanced inter-switching and more effective competitive line
rates; and
- an after-negotiations two-tier last resort Final Offer Arbitration
process, with a one-arbitrator simple 30-day process for freight
rate disputes up to $750,000 and a one- to three-arbitrator 60-day
process for larger disputes.
- With respect to the process for western branch line discontinuance,
the following process was proposed: a 12-month notice period,
a 60-day period to advertise a sale followed by a negotiation
period of up to 6 months and, if unsuccessful, reverting back
to the current Canadian Transportation Act procedures. Stakeholders
also suggested that the railway abandoning a line in a municipality
should pay adjustment assistance to the municipality. Line transfer
negotiations between railways and short line/community groups
could take place at any time. To enhance branch line transfers,
stakeholder's proposals related to several factors:
- the preparation of a comprehensive set of guidelines by Transport
Canada through consultations to facilitate negotiations;
- the establishment of the net-salvage value of the line at the
beginning of the transfer process to expedite the negotiations;
- a third-party mediation process; and
- a right of recourse when a railway is not negotiating in good
faith.
- For producer cars, the need to keep current legislative provisions
was widely accepted, and satisfactory conclusions were reached
on a number of technical questions related to the provisions
of producer cars in a commercial contract-based system.
- Stakeholders proposed two models for changing the logistics
chain, each offering greater scope to market forces.
1. Under one model, the Canadian Wheat Board (CWB) negotiates
directly with railways and terminals for capacity (including
volume, service and price), and signs framework agreements with
grain companies that include specified incentives and/or penalties
for performance. Tenders, performance awards or producer contract
sign-ups are then used to allocate sales awards to grain companies
to supply CWB requirements. Under this model, the allocation
of rail car orders to specific geographic regions is done by
the CWB. Terminal capacity and car supply agreements are tied
to CWB sales. Concerns raised with this model centred on accountability.
2. The other model, drawn from Justice Estey's recommendations,
assumes the existence of a competitive rail environment. To determine
overall capacity requirements and assign responsibility for supply
of needed grain by the CWB to the grain companies, which in turn
have to contact railways for services, the stakeholders propose
an annual meeting be held at the beginning of the crop year.
Grain companies use price incentives to attract grain from producers.
Concerns with this model centred on the CWB's need to determine
rail and terminal capacity to make sales in confidence.
- Lastly, the report recommended that a review and sharing
of productivity gains take place after the reform's changes have
been implemented.
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Forest Products
Forest products had a strong year in 1999, with flows about
7.5 per cent greater than in 1998. This increase reflected a 14
per cent increase in traffic of processed forest products, to
22.5 million tonnes. Flows of unprocessed products remained flat
at 16.6 million tonnes. In total, forest products accounted for
15 per cent of total rail traffic in 1999.
Ores and Mine Products
While iron ore made up 58 per cent of the ore and mine products
sector in 1999, shipments were down 17 per cent from 1998 to 32.3
million tonnes, accounting for only 12 per cent of total
traffic, compared with 15 per cent in 1998. Softness in world
steel markets and decisions by steel makers to draw down their
inventories may have contributed to the drop in demand for Canadian
iron ore.
Flows of other ores and mine products reached 22.9 million
tonnes in 1999, up slightly from the 21.5 million tonnes
shipped in 1998. Among these products, gypsum was the lead performer,
with 5.1 million tonnes on the rail system, up 53 per
cent. Alumina, bauxite and other aluminum ores accounted for 5.2
million tonnes loaded, up 13 per cent.
Fertilizers and Fertilizer Materials
In 1999, this sector as a whole generated less traffic than
in 1998, but maintained a share of ten per cent of total rail
traffic. Potash traffic declined by 0.5 million tonnes in 1999,
due to lower production levels and low grain prices, which affected
sales negatively. Sulphur and other fertilizer shipments rose
by five per cent to 12.5 million tonnes.
Imports of phosphate rock to Alberta via Vancouver dropped
off in 1999, as a domestic source was discovered near Kapuskasing,
Ontario. There were no phosphate rock loadings recorded until
August 1999. Almost 94,000 tonnes moved in the latter part of
the year, compared with a total of 1.1 million tonnes in 1998.
Coal
After ores in aggregate, coal products had the largest share
of rail traffic in 1999, with 16.6 per cent of the tonnage. Coal
and coke flows increased by 10.5 per cent to 43.3 million
tonnes in 1999.
Industrial Products
Automobiles and parts, refined petroleum products, chemicals
and metals continue to account for an increasing proportion of
rail traffic in Canada, making up 14.8 per cent of flows in 1999.
Automotive products accounted for only 13 per cent of the industrial
products sector; however, this sub-sector saw the biggest increase
in traffic, with 1999 movements reaching 4.9 million tonnes, up
38 per cent from 1998. Flows of ferrous and non-ferrous metals
increased by almost three per cent to 9.2 million tonnes. Petroleum
and chemical traffic declined by nearly four and six per cent,
to 10.9 and 13.5 million tonnes, respectively.
Intermodal
After a lull in growth in 1998, intermodal traffic leapt by
35 per cent in 1999. Container-on-flat-car tonnage rose to 22.1
million tonnes, 36 per cent higher than in the previous year.
Trailer-on-flat-car traffic, after a 28 per cent decline in 1998,
recovered 16 per cent to 1.6 million tonnes. The share of total
traffic of this sector rose from 6.9 per cent in 1998 to 9.1 per
cent in 1999.
Figure 12-3 shows monthly loadings for intermodal traffic between
1997 and 1999.
Rail Transportation
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