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Canadian National Railway: Uncertain future ahead

India Blooms News Service | | Jan 05, 2017, at 08:31 pm

#CanadianNationalRailway

Calgary, Jan 5 (IBNS): Canadian National Railway didn't fare well in the past 12 months with decline in cargo volumes, a failed takeover bid and divisions within the industry, according to media reports.

Although economic growth and elevated level of consumer confidence are likely to better things in 2017, yet taxes and trade could be act as destabilizing forces, reports said.

Experts are also awaiting US President-elect Donald Trump's overall implementation of policies regarding trade and commerce, media reported.

"There is far from complete clarity on whether Trump will carry out all of his campaign promises, but overall our assessment is that his potential policies will be mixed for Canadian railways," sSaid Cameron Doerksen an analyst from the National Bank.

Doerksen said, "More restrictive trade policies including the implementation of tariffs on softwood lumber, potential changes to NAFTA and tariffs on Chinese imports would clearly be negative for the railroads particularly for Canadian National Railway Company, which has a large exposure to lumber as well as cross border and international containers.

"However, lower U.S. corporate taxes would be positive for CN and potentially lower their combined tax rates by five to six percentage points, he said."

Canadian Pacific Railway, which had abandoned its hostile take over bid of Virginia-based Norfolk Southern Co. on the face of opposition of US Government said Trump's tax break could reduce the company's effective tax rate to 20 percent from 26 percent.

According to reports, American Association of Railroads (AAR) was unhappy with planned rules proposed to cap certain freight rates as well as a requirement that would open a portion of railway network to competitors.

Big operating railways in the US, including CP and CN Railway are supposed to meet the dead-line to complete the installation of fail-safe train controls designed to improve safety by overriding human errors.

However, the biggest question is hovering around whether Trump Administration would scrap the NAFTA Agreement and erect barriers to cross-border trade.

Experts believe since CP and CN have significant cross-border trade and have much at stake, the three country trade deal might be renegotiated and not discarded.

However, it is to be seen how the cross border trade takes shape for CP and CN Railways with the assumption of charge by Donald Trump on Jan 20.

(Reporting by Chandan Som )

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