MONTREAL – Canadian Pacific (TSX:CP) doesn’t expect to carry as many retail goods next year due to shaken consumer confidence but Asian demand for energy and other commodities continues to look strong, CEO Fred Green said Wednesday.
“Retailers tell us that they can stimulate sales, but they have to do it through major promotions,” Green said after a speech. “You go, you get what you need and you get out.”
Green said Canadian Pacific’s intermodal business, which carries retail goods in containers that can be moved by ship, rail or truck, isn’t expected to return to strength soon.
“We’re seeing a lot of discomfort in consumer confidence and as a consequence I would not expect the intermodal side of the business as being particularly robust this year or next year,” Green said.
The railway is often seen as a bellwether for the economy because it carries consumer goods and cars as well as forestry products and commodities throughout North America.
Green said demand for commodities such as potash and grain and energy products remain strong largely due to Asian demand.
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While growth in Asian economies might not be as strong as a few years ago, it’s still reasonably “robust,” Green said.
“So we see no reason on the foreseeable horizon that the softness would materialize in those markets,” Green said.
He also expects Canadian Pacific will move more oil out of the Bakken Formation, which covers parts of Montana, North Dakota, and Saskatchewan, to refineries in the U.S. Gulf Coast region.
“We are moving every week solid trains of oil out of there to the Gulf and we continue probably double or triple that over the next couple of years,” he said during a speech at the Canada Maritime conference.
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Canadian Pacific was affected by extensive spring flooding, experiencing almost 90 separate outages during its second quarter. Its main north-south corridor to Chicago was out of service for 23 days because of massive flooding along the Souris River, which flows through Saskatchewan, Manitoba and North Dakota.
The railway will spend $300 million to upgrade a Winnipeg to Edmonton line to mainline track speed to allow it to carry potash and grain if there’s flooding on its main line from Winnipeg to Regina, Green said during his speech.
“It will enable us to have a faster, more consistent, more reliable intermodal service from the east to Edmonton.”
Canadian Pacific will also upgrade a line south of Regina and another south of Winnipeg that go to St. Paul, Minn. If one of those lines experiences flooding, the other line would then be able to handle the diverted traffic, he added.
Canadian Pacific has spent more than $1 billion this year in capital investments, such as new sidings and extensions, as well as longer trains.
Canadian Pacific transports coal, fertilizer, grain, automobiles, consumer goods and other materials across its vast North American rail network.
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