Important acquisitions for Canadian Pacific

The rail transport sector has been facing a slowdown since the end of 2019 as the pandemic has deeply affected the transportation and logistics industry. However, Canadian Pacific has not given up on its growth strategy.

In fact, Canadian Pacific is in the process of acquiring full ownership of the Detroit River Rail Tunnel. The transaction, which is expected to become official at the end of the fourth quarter of 2020, also involves the collaboration of the Defined Benefit Pension Plan for Municipal Employees of the Province of Ontario (OMERS). Together, CP and OMERS already held 16.5% ownership of the tunnel. By entering into this purchase agreement, the two parties will soon become the sole owners of the 2.6 km tunnel that connects the city of Windsor, ON to Detroit, USA.

Since Canadian National (CN) took possession of a part of the CSX railway network in 2019, a significant portion of the railway line that connects the port of Valleyfield to major ports located on the American East Coast and New Orleans, CP had to invest in its growth strategy to expand its network in order to keep up with the competition and play in the big leagues. By granting itself better control of one of the gateways leading to the Port of Detroit, a major facility dedicated to importing and exporting, CP will provide better accessibility to its customers. “This is an important corridor for CP and by taking full ownership, we can better operate the asset to the benefit of our customers and the North American supply chain,” announced CP President and CEO Keith Creel, in a press release. ¹

In addition to this initiative, last spring, CP acquired the Central Maine & Quebec Railway (CMQ), which expanded the reach of its rail network further into the northeastern United States and Atlantic Canada. Going forward CP can utilize 481 miles of rail tracks mainly in Quebec and Maine, a “generational business opportunity to serve more shippers through a coast-to-coast network across Canada,” explained by Mr. Creel. ² This portion of the regional network rail line primarily serves the forestry, petroleum, chemical, and plastic industries whose shipments will transit to the Port of Searsport in Maine and to the Port of Saint John in New Brunswick.

As a result of the agreement with the CMQ, CP can now use a shorter 200 km rail route, which speeds up the transportation of goods from the East Coast to major centres, such as Montreal and Toronto. By taking ownership of the CMQ and its US division, CP acquired more than 244.2 miles of railway located in Maine and in Vermont, including 57.3 miles that were previously leased to the Maine Department of Transportation.

Obviously, every time a Canadian company takes ownership of a new US rail route, it creates more opportunities for the entire transportation and logistics industry in Canada. The benefits are considerable: more options for the supply chain, reduced transit time, better control of traffic and rail sharing, fast and efficient movement of goods dedicated to Canadian imports and exports.

This is an undeniable advantage over the competition. We must remember that our steamship lines are dependant of an efficient railway network. Our international commercial trade, which is vital to the Canadian economy, could not be so prolific without it.

We will have to be patient before these recent acquisitions and their benefits occur. A period dedicated to railroad repairs is often necessary to optimize the busiest routes when a new owner takes possession. However, Cargolution welcomes this news as it is an opportunity that will offer more latitude and alternatives to our customers of our niche industries, who put their trust in a reliable and efficient railway and intermodal network for their commercial goods movement, coming or going abroad.