The service, announced on Thursday and set to begin in October, is unusual because it’s a short haul for both railroads, which runs counter to the industry trend toward focusing on more profitable longer hauls in high-volume intermodal lanes.
But CN aims to fill up its railroad in Eastern Canada, which over the past decade has not seen the robust growth experienced on its lines in Western Canada.
“Over the long term, the freight market will increasingly depend on demand driven by the consumer economy and the rail industry must create new intermodal services that can successfully rival the over the road options,” CN CEO JJ Ruest said in a statement. “This interline service fits perfectly with our strategic focus on feeding our unique network through organic and inorganic growth opportunities, including extending our reach into new geographic markets.”
The railroads appear to have business lined up from current international intermodal partners.
“Answering a need expressed by our customers, this new service positions us to capture market share from trucks and increases capacity in these expedited lanes, as larger container ships call at the Port of Philadelphia and Port of New York and New Jersey,” CSX CEO Jim Foote said in a statement.
Transit time will be two days for northbound shipments and three days for southbound moves.
The new service, which will ride existing trains that CSX and CN use for interchange at Buffalo, N.Y., and Huntingdon, Quebec, will square off against intense truck competition.
Canadian trucks toting international containers are a common sight on the New York State Thruway. Some 1.2 million trucks crossed the Peace Bridge linking Buffalo, N.Y., and Fort Erie, Ontario, in 2018, according to the Buffalo and Fort Erie Public Bridge Authority. The Peace Bridge spans the narrow east end of Lake Erie.
Nearly 942,000 trucks entered the U.S. in 2018 at all of the Niagara River bridges linking Ontario and New York, according to the U.S. Bureau of Transportation Statistics. And more than 308,000 trucks entered the U.S. at the Champlain, N.Y.-Lacolle, Quebec, border crossing south of Montreal, the federal data show.
CN and CSX have a good opportunity to capture market share for Toronto traffic, intermodal analyst Larry Gross says.
“Newark, N.J., to Toronto is 487 highway miles, which including port and border delays makes it a difficult one-day truck haul,” Gross says. “There’s a good chance that intermodal can compete as rail circuity is pretty moderate.”
The New Jersey-Montreal market is a tougher nut to crack.
“For one thing, it’s considerably shorter at 375 miles,” Gross says, with Interstate 87 and Autoroute 15 offering a straight shot between the New York-area and Montreal.
“For another, the CSX-CN route … will be extremely circuitous,” Gross says. “CP of course would be a much more logical routing via the D&H. The economics of the proposed service would be very challenging to Montreal unless the pricing is somehow on a more incremental basis.”
The CSX-CN Montreal traffic will run up the West Shore of the Hudson River, then turn west at Selkirk on CSX’s Water Level Route to Syracuse, N.Y., before turning north on CSX’s Saint Lawrence and Montreal subdivisions. The Selkirk-Syracuse dogleg alone adds 150 miles to the rail route.
CSX’s 40-mph Saint Lawrence and Montreal subdivisions are among the lines the railroad put out to bid last year as it looks to spin off low-density routes. CSX declined to comment on how a potential line sale would affect the new intermodal service.
CN did not immediately respond to an email seeking additional details.
The deal with CSX is the latest effort CN has made to boost intermodal traffic in Eastern Canada.
CN purchased Canadian trucking company TransX and is acquiring the intermodal division of Alberta trucking company H&R Transport, which specializes in temperature-controlled shipments. The railway also is investing in a new container port at Quebec City and hopes to land more international traffic at an expanded container port in Halifax, Nova Scotia.
Over the years, various attempts to offer Montreal-New Jersey intermodal service have failed due to a lethal combination of low-cost truck competition, the short haul, and much faster highways.
The Delaware & Hudson tried Lacolle, Quebec-Oak Island, N.J., intermodal service, and Canadian Pacific later tried interline Montreal-New Jersey intermodal service with CSX on the direct D&H-West Shore route.
CSX also offered service between its now dormant intermodal terminal at Valleyfield, Quebec, and New Jersey and Philadelphia. Transit time was four days.