Fertilizer shipments remain a priority for railroad Canadian National (CN) despite recent disruptions.
"The railroad is still moving, still humming and it is business as usual crossing the [Canada-US] border," CN senior vice president – rail centric supply chain James Cairns told Argus. "Our network is very fluid."
CN fertilizer and potash volume in the first quarter is up by 10pc compared with a year earlier, Cairns said.
CN expects that first quarter volume of potash will rise to one of the top three first quarters in the last decade.
"We are very keenly aware that keeping people fed is very, very important," Cairns said. "So, the application fertilizers, moving potash — we are keenly aware that we have a responsibility to keep those products moving."
Shippers remain concerned about disruptions by the coronavirus, particularly any effects on cross-border traffic between Canada and the US. The border is closed to retail and resident traffic, but rail operations have been allowed to continue and remain fluid.
CN is "a long way from having to make priority decisions," Cairns said. The railroad has excess capacity and could handle "a fairly significant uptick in demand if that was to come about," he said.
CN expects that some volume may shrink because of the coronavirus, such as crude and gas products. But any decline will free up resources that can be used elsewhere in the system.
Disruption to Canadian rail distribution would have limited impact on the US potash market in the short term but could have substantial impact on export markets for potash and sulfur.
US fertilizer distribution networks are well-covered for spring potash demand, with stocks elevated after a lackluster fall application. Disruption to rail distribution would likely not cause widespread shortages, as the greater risk to supply is from a lack of truck drivers. However, US sulfur markets are tight amid lower refinery run-rates, and a reduction in sulfur supply from Canada would exacerbate that.
Shipments by rail to west coast Canada and US ports are critical for Canadian potash and sulfur producers. Approximately 12mn metric tonnes/yr of MOP and sulfur is exported to non-US destinations by sea, most of which reaches the ports by rail.
Improved railroad operations are driving the volume growth and fluidity, Cairns said. CN is benefiting from significant capital investments it made in western Canada during the last few years.
The improvements have allowed the railroad to recover faster from system disruptions, including recent protests that blocked CN's main rail line connecting eastern Canada to the west and US midcontinent.
CN is in constant communication with customers, and so far demand has been steady, Cairns said.
"We really are focused on ‘is there going to be a lag in demand related to production as opposed to overall market demand?' And we have not seen it yet," he said.
There have been a few changes as some customers reduced shifts or split labor into two teams to limit virus exposure. Aside from that, business has been "pretty robust."
