26 September 2010

Potash, Asia Shipments Boost CP Rail Volumes

Calgary Alberta - Volumes of goods moved by Canadian Pacific Railway Ltd are up 14 percent so far this year thanks to a recovery in potash exports and a "surprise" leap in intermodal shipments on Canada's West Coast, an executive with the railway said Wednesday.
 
CP Rail's shipments of export potash, an important nutrient for crops and the focus of 2010's biggest corporate takeover attempt, are up 200 percent this year after the market stalled last year during the economic recession, said Chief Financial Officer Kathryn McQuade said.
 
At the same time, CP's intermodal traffic, which involves transport by more than one form of carrier, in this case rail and truck, is up 40 percent so far this year through the Port of Vancouver on the Pacific Coast.
 
"We did anticipate growth but we didn't see the West Coast kind of being on fire like we are seeing today," McQuade told a CIBC investor conference in Montreal.
 
Intermodal volumes through the Port of Montreal on the East Coast were only "modestly up" by comparison because shipments there were tied to European markets where the economic recovery is still slow compared with the Asia-Pacific region.
 
McQuade said it was not clear how long the West Coast shipping boom would last, although signs remain positive.
 
"What we are hearing is that the steamships are still full and still on the way. So we are not anticipating any major decline at this point, but again visibility for us is not what it used to be several years ago," she said.
 
POTASH IS HOT
 
CP, Canada's second biggest railway, is seeing "very strong demand" for potash from the United States, McQuade said. However, shipments are not yet back to 2008's pre-recession levels, and it is hard to give an outlook for the rest of the year as much of the selling is into the spot rather than forward markets.
 
Whatever the outcome of BHP Billiton's $39 billion hostile bid for Potash Corp of Saskatchewan Inc., it will likely be a boon for CP Rail, which has the exclusive shipping contract for Canpotex, the export arm of Canada's major potash producers, McQuade said.
 
"I think it is a positive for rails as rails have to move the product... We have great connections, good mine access... (and) some of the best lines to the tidewater," she said.
 
Overall, carloads across CP's businesses were well up on last year but still below 2008 levels, although the gap was closing. Volumes, however, remained very volatile.
 
"It's not because our customers don't want to tell us (what they are planning), I think they truly are not really certain as to where their business is going either," McQuade said.
 
RBC Capital Markets analyst Walter Spracklin reaffirmed his "outperform" rating on CP on Wednesday, following meetings with company management. He said he expected the railway would continue on its path of achieving "material" cost-savings and forecast other analysts would revise their earnings forecasts upward.
 
CP's stock was up 3 Canadian cents at $63.46 on the Toronto Stock Exchange on Wednesday afternoon. It is up 23 percent this year, far ahead of the benchmark S&P/TSX composite index, which has gained 6.5 percent.
 
Nicole Mordant.