Winnipeg Free Press - PRINT EDITION

Shortage of railcars spreads, costs millions

Paper plant shuts down; ships waiting for grain

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Grain shippers are beside themselves with frustration over the western Canadian rail congestion, and it's now spilling over into other sectors and causing plant shutdowns.

Farmers and elevator companies have been complaining for several weeks about missed opportunities from this year's bumper crop because of poor access to railcars.

And this week in The Pas, Tolko's Manitoba Kraft Paper Division had to shut down production for five days because of delays in railcar arrivals after its warehouse became completely filled, making it unsafe to keep making more paper.

Blair Rydberg, Tolko's site manager at The Pas said, "This has never happened before in the mill's history. I have been in the industry for 33 years and I can never remember this happening anywhere."

Rydberg said the plant's 320 employees were able to continue working through this week after production was halted on Wednesday but some operations staff will be laid off and not paid through this weekend.

He said he is told there will be CN cars on Monday that will be enough to keep production running.

Rydberg said he has heard of other paper plants in B.C. having to close. He said extreme winter weather lasting for several weeks exacerbated an already clogged system.

But grain shippers are not accepting poor weather conditions as an excuse for the poor services they say they are getting.

Rydberg said the shutdown will cost Tolko a lot of money but it may pale in comparison to the financial hit the agriculture industry is taking.

Wade Sobkowich, executive director of the Western Grain Elevator Association, said his members have already paid out $20 million in demurrage while West Coast cargo ships wait to load the grain they have been contracted to ship.

"That's the penalty we have to pay to have vessels bobbing in the ocean waiting for their shipments to arrive," said Sobkowich.

He said in a typical year, his members -- including the big grain companies such as Richardson Pioneer, Cargill and Viterra -- would pay demurrage charges of around $2 million.

"Part of the reason is the large crop," he said. "The railways do not take into account demand when providing capacity. They optimize performance to maximize return to shareholders. We think there needs to be the right motivators put in place to provide that surge capacity in the time of peak shipping demand."

Officials from both CN and CP argue they have shipped far more grain this year than their average volumes.

"The current Western Canada harvest for the 2013/2014 crop year, as you know, is of historic proportions," said Mark Hallman, a spokesman for CN. "The challenge of moving the crop is not a railcar-capacity issue... the issue is that western Canadian farmers have grown the biggest grain crop in history."

He said the company has placed 12 per cent more hopper cars in the system than its five-year average from August to December and unloaded 9.5 per cent more grain than the five-year average at the Vancouver port and 22 per cent higher at Prince Rupert.

Kevin Hrysak, a spokesman for CP, said its grain loadings are about 11 per cent higher than last year and 16 per cent above the five-year average.

"CP moved more grain in Canada over the last four months of the heavy harvest period in 2013 than ever before for the same period," Hrysak said.

But that is little comfort to farmers with grain to sell, willing buyers at hand but no certainty as to how it can be shipped.

Doug Chorney, the president of Keystone Agricultural Producers and an East Selkirk farmer, said that is exactly the scenario he's facing.

"I'm trying to arrange the shipment of five producer cars," he said. "I have a committed buyer at a significant price... if I ship in January or February. I can't predict with any certainty I can do that."

Both Chorney and Sobkowich are not optimistic any changes will be forthcoming. They both said they are at the mercy of the rail carriers -- there is no other way to get Prairie grain to market -- who have no requirement to change their service because of a customer's change in production.

"Ideally, they would like to move one-12th every month so they do not have to invest in surge capacity," said Sobkowich.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition January 18, 2014 B7

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