The Chicago skyline is seen behind a CN locomotive. (Photo: CN)
Stuart Chirls
5 min read
Canadian National expects to haul slightly more rail freight in 2025 than a year ago, as President Donald Trump’s tariff war tempers expectations for cross-border trade.
“There was a new Trump administration to start the year, so we thought there would be lots of uncertainty,” Chief Executive Tracy Robinson told the Bank of America industrials conference Tuesday in New York. “We continue to be optimistic that trade deals are going to get done, as we saw over the weekend.”
A third of the Montreal-based railroad’s (NYSE: CNI) freight, including steel, grain and containers, originates in or goes to the United States. But that relationship has been upended by Trump’s escalating tariffs — and his increasingly aggressive rhetoric.
“We haven’t seen a big impact from tariffs so far,” Robinson said, or from fewer ships sailing from China prior to the tariff pause as ocean lines blanked scheduled services.
Robinson affirmed CN’s target of 10%-15% earnings-per-share growth this year, including profits that were 8% higher in Q1.
“The second quarter should also see growth in earnings, if not volume,” said Robinson, who joined CN as CEO in early 2022.
“There is always some uncertainty, and more so this year. The best way to manage that is to stay close to your customers. They are talking about access to different kinds of markets. We are seeing how quickly those blank sailings can be filled, talking with our customers about containers.”
Like an airplane temporarily losing altitude, the company anticipates an “air pocket” effect on China volumes by the end of May or beginning of June, the aftereffect of 145% tariffs that amounted to an embargo on Chinese imports. “It depends where they are in the manufacturing cycle; it could be a couple of weeks or longer.”
Along with U.S. cross-border freight, CN sees another third from international and the remaining third within Canada.
“Ten percent of our business is with China, and 2% between the U.S. and China,” Robinson said. “The rest is within Canada. It’s diversified, which we think is a benefit.”
Robinson said the railroad is not expecting an economic lift to earnings this year.
CN expects mid-3% volume growth for the year, one-third of that on easy comparisons related to a strike in 2024. A third will come from slightly positive industrial production, and half from CN-specific growth.
CN claims a 50% market share in transporting grain, which Robinson termed “very good,” in a positive crop year despite adverse weather in February.
International volumes are up at the Port of Prince Rupert, British Columbia, where CN is the sole railroad, on calls by Hapag-Lloyd (HLAG.DE) (as part of the liner’s Gemini Cooperation with Maersk (MAERSK-B.CO). Robinson said said CN has a 65% share of international intermodal business on the west coast of Canada.
Robinson sees Prince Rupert as an important driver of future growth. “We have great partners in [terminal operator] DP World and Port of Prince Rupert [Authority]. They’ve got capacity there, currently running 50-50 with U.S. volumes, and offer on-time service, especially for U.S. destinations. We want it 70-30 U.S.”
CN moved 3,000 carloads of plastic pellets into Prince Rupert in 2024 and expects that volume to grow. IntermodeX, a provider of intermodal services and division of container terminal operator SSA Marine, is developing a transload facility that connects directly to CN rails, and the port also handles export grain and coal. A natural gas facility is undergoing expansion as well.
The railroad will continue to see quarter-to-quarter improvement in pricing, which Robinson said was ahead of plan in the first quarter. “Pricing is above inflation for the year,” she said.
The company has 24,500-25,000 employees, with about 550 currently furloughed. “We’re running tight [on costs]. Head count is week to week based on volumes we can see coming in. Overall, we are flattish year on year.”
CN in the past has outsourced some of its engineering staff but is now insourcing it with a corresponding reduction in cost. “We have also had a certain level of attrition within furloughs, but depending on growth we may do a little bit of hiring. Also, we can handle any surge volume by putting management employees on trains; we can do that in Canada [per labor rules] and not take people off furlough.”
While saying that “we don’t manage to operating ratio,” Robinson added CN “won’t oversell our network but improved volume is magic in a fixed cost environment.
“In this framework, the operating ratio should start with a 5.”
Boasting an operating model that has worked through strikes, port issues, forest fires and hard winters, CN currently has 80 locomotives and 4,000 cars in storage.
“We like to run the place lean and we are running fast right now. We need less equipment to run the same volume; that’s resilience,” said Robinson. The railroad does not expect to purchase new motive power over the next several years, instead refurbishing 60-63 locomotives in 2025. “We can also borrow loco hours off other railroads; there is some of that going on right now. Availability is at a level we haven’t seen in some time.”
Capital spending in 2025 is set at $3.4 billion, or 19% of revenue, for track maintenance and other work.
Robinson said the Falcon Premium cross-border intermodal service operated with Union Pacific (NYSE:UNP) and Ferromex from Mexico to Detroit and Toronto is slowly growing volume.
“It’s a long game turning the market around with truck business that should move by rail,” Robinson said. The company is aiming to upgrade its transborder services with Norfolk Southern (NYSE:NSC) connecting Canada with Kansas City, Missouri, and Atlanta, and CSX (NASDAQ:CSX) linking Montreal and southern Ontario with ports in Philadelphia and New York-New Jersey, to Falcon Premium levels.
The former Elgin, Joliet & Eastern Railway, acquired by CN in 2007, gives the railroad a bypass around the Chicago bottleneck that “nobody else has; we can get around there in 24 hours,” Robinson said.
This article was updated May 15 to clarify that CN claims 65% of the Canada’s West Coast international container volume.
