Railways confront tough times with volumes dropping as recession looms

MONTREAL — Canada’s two main railways face a bleak year ahead as a looming recession weighs on freight volumes.

Carloads fell more than 17% year over year last week, part of a growing decline in shipments since the start of the year and accelerated by the COVID-19 pandemic.

National Bank analyst Cameron Doerksen expects volumes at Canadian National Railway Co. and Canadian Pacific Railway Ltd. will drop “significantly” in April and “even more” in May as industrial supply chains remain shut down and retail severely curtailed.

Container traffic and automotive shipments have been particularly hard hit after Asian and North American production hubs went into lockdown due to the novel coronavirus.

Nonetheless, CN and CP remain fully operational with stock prices roughly 15% below February highs, a shorter fall than that of many transportation industry companies.

Doerksen expects freight volumes to be “severely impacted in the coming months” as Canada stares down a 2020 economic contraction of 6.2%, according to an International Monetary Fund forecast April 14.

Related: IMF: Stung by virus, global economy will shrink 3% in 2020