Canadian National (NYSE: CNI) and eastern U.S. rail company CSX (NYSE: CSX) have announced plans to offer new intermodal service between the CSX-served ports of Philadelphia, New York and New Jersey and CN’s areas of greater Montreal and southern Ontario.
The service, which will begin on October 7, 2019, provides both rail companies with access to markets that each company has been vying for in recent years. Canadian National has expressed interest in recent months to fortify its presence in eastern Canada, including making plans to invest its resources at the ports of Halifax and Quebec. Meanwhile, CSX said this week that the service will provide CSX with access to Toronto and Montreal via CN’s intermodal yards.
The new intermodal service will compete against trucks by converting shipments from over-the-road service to rail, which is typically less expensive.The service also might provide rate relief to ocean carriers moving goods between Montreal and the Port of New York and New Jersey.
“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,” said CSX chief executive officer Jim Foote.
The new service from CN and CSX could be a source of volume growth for both companies in the next several years, said Amit Mehrotra, a transportation analyst with investment firm Deutsche Bank.
The distance between Philadelphia and Montreal and Toronto is highly competitive with truck, and “this dynamic emphasizes the importance of service and on-time reliability which are key pillars of precision scheduled railroading,” Mehrotra said. “Additionally, we believe this move highlights the ongoing investments that both CN and CSX are making in their intermodal networks in order to capture additional imports coming into U.S. East Coast ports.”
CSX has an intermodal terminal in Salaberry-de-Valleyfield in Quebec, Canada, according to CSX’s website. CSX said that with the launch of the new CN service product, CSX will discontinue service at its Valleyfield terminal.