Canadian Pacific’s Intermodal Swims Against the Tide

Canadian Pacific’s intermodal traffic

For the week ended August 6, 2016, Canadian Pacific (CP) reported a rise of 7.2% in overall intermodal traffic, while domestic intermodal volumes rose by 8.6%. The company moved ~8,000 containers and trailers in domestic intermodal in the reported week, and international intermodal volumes, which were down in earlier weeks, rose by 6.2% in the first week of August 2016.

Canadian Pacific’s Intermodal Swims Against the Tide

Notably, Canadian Pacific (CP), unlike other Class I railroads, doesn’t report the intermodal traffic in the same format. Rather, it segregates its intermodal volumes into domestic and international, and its intermodal volumes are measured by number of containers and trailers hauled.

Why is intermodal important to CP?

Domestic intermodal formed 11.2% of CP’s revenues and 15.8% of total volumes last year. International intermodal contributed ~9% of revenues and 21.3% of volumes.

Increased truck capacity in CP’s short-haul lane will most likely result in tough competition in the domestic intermodal space going forward. Since the company squeezes most of its domestic intermodal business from Canada, it will be largely impacted by the growth of the Canadian economy.

International growth

The company’s international intermodal business consists of containerized traffic moving between the ports of Vancouver, Montreal, and New York. CP’s international intermodal growth is tied to capacity growth at these ports. Retail demand and the pace of transpacific trade with China also have a bearing on the international intermodal volumes of other Class I rail carriers.

Remember, intermodal of railroads compete with major US trucking companies (XLI) such as J.B. Hunt Transport (JBHT), Old Dominion Freight Line (ODFL), Swift Transportation (SWFT), and XPO Logistics (XPO).

In the next part, we’ll take stock of the rail traffic of Genesee & Wyoming (GWR) for July 2016.