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Coronavirus restricting flow of consumer goods into Canada, says CN CEO


MONTREAL — The deep slump in Chinese production due to the novel coronavirus is narrowing the flow of consumer goods into Canada, hurting business at the country's largest railway.

"In the last 20 days we saw a steady decline. And this week we’ll see a low, and next week we’ll see a low again," Canadian National Railway Co. chief executive JJ Ruest said in an interview, referring to container shipments that contain products ranging from spatulas to spare parts.

Fears over the spread of the virus — which has infected at least 92,000 people and caused more than 3,000 deaths worldwide — prompted the Chinese government to extend the Lunar New Year by two weeks, keeping factories closed in hopes of stemming the outbreak last month.

The epidemic has sent markets tumbling, with Canada’s main stock index posting its worst five-day stretch last week since the 2008 financial crisis amid cancelled business travel and disrupted supply chains.

"From here on, I’m hoping the economy will hold together, despite the concerns of the last 10 days of the coronavirus," Ruest said, but predicted a "weak" month ahead for container imports.

Container shipments make up more than one-quarter of CN's freight revenues, with China accounting for the biggest slice of West Coast port volume.

The disease is one of several headaches for the CEO. Blockades that stalled West Coast port activity and brought CN's eastern network to a near standstill will dent its income statement on a level comparable to the eight-day strike last November.

"It will be probably in that scale," Ruest said. "It’s very significant in terms of lost sales and also increased costs."

The labour disruption last year cost the Montreal-based company $140 million, according to a December breakdown by Citi analyst Christian Wetherbee.

"It’s like a baseball game with 12 innings. We’re only starting the third inning this week with the beginning of March," Ruest said. "We’re going to work hard in the next 10 months to do what we can to save the year."

Ruest said CN has called back most of the 450 workers temporarily laid off last month, when the blockades sidelined more than 1,400 freight and passenger trains.

The recovery process will extend into the spring as shipments of bulk and consumer products ramp up, Ruest said.

CN shut down its eastern network on Feb. 13, one week into a blockade by Tyendinaga Mohawk protesters that cut a key rail link east of Belleville, Ont.

Provincial police cleared the blockade last week, which was launched in solidarity with Wet'suwet'en hereditary chiefs who oppose a natural gas pipeline slated to pass through their traditional territory in British Columbia.

Hereditary chiefs reached a draft agreement Sunday with senior federal and provincial government ministers centering on rights and title.

This report by The Canadian Press was first published March 3, 2020.

Companies in this story: (TSX:CNR)

Christopher Reynolds, The Canadian Press