Greetings and welcome to the Scotiabank Canadian National Railway Conference Call. During the presentation, all participants will be in a listen only mode. A reminder, this conference is being recorded for distribution purposes on Wednesday, 09/02/2020. I would now like to turn the conference over to Konrad Gupta from Scotiabank. Please go ahead.
Thank you, operator. Good morning, and thanks for everyone for joining us today's 9AM investor call with the management team of Canadian National Railway. My name is Conark Gupta. I'm a Scotiabank's transportation sector analyst. It's been interesting times for the global and North American economy as well as class one railroads over the past several quarters with the pandemic, labor actions, blockades, trade noise, energy market volatility, etcetera, all posing challenges for the railroads.
Yet CN is navigate navigating its way through with the help of intermodal, grain, and some other segments. So joining us this morning to discuss how CN is faring in this environment, we are pleased to have JJ Ruest, president and CEO Keith Reardon, Senior Vice President, Consumer Product Supply Chain and Paul Butcher, Vice President, Investor Relations. We will start the call off with some opening remarks by the management team before I host a fireside chat with them. So everyone should have a copy of the presentation they have put together for us. And with that, JJ, Keith and Paul, over to you.
Good morning, everyone, and thank you, Cornell, for having us today. What I will do is I will do some opening comments using sort of the first two slides that you have on your deck for those of you who are watching listening to us on the webcast. And Keith will give us his viewpoint and what's happening in the world of intermodal right now. So let me start on Page three, which is a slide that we show roughly the RTM recovery. RTM meaning measure of volume in the rail industry.
As you could see, the volume, the month of May was the low point, and things have been improving since then. The the the segment which have the probably the better resiliency have been domestic and domestic intermodal and domestic international. Just simply people are spending more money at home or near home, and that's really the world of, intermodal. Canadian grain has been extremely strong. In fact, for example, in the month of August, you know that we set a record in July and we also have set a record in month of August.
We will have moved roughly 2,300,000 ton of grain in Canada. Canadian coal has been good and intermodal, let's say intermodal is back. So just look quickly, if you look on the the right side of the slide, just a bit of a sense of sequential gain. In the month of June, we were up on volume wise as a merger by RTM 5%. The Port Of France Rupert got quite busy, meaning that in early in the spring, we had blank sailings, which means that they were taking ships out of rotation.
We had less blank sailings in July and the business was coming back from Asia. Frac sand was also decent because I resumed drilling activities mostly in Western Canada. U. S. Grain is also picked up.
And as you know, The U. S. Grain crop looks good for this fall. There should be a good story for railroad and CN as well. And when we talk about grain, we also talk about ethanol.
Ethanol is made out of corn. And ethanol the main use of ethanol is to be blended with gasoline. So as people start to drive again, the demand for ethanol and diesel and and gasoline came back. Obviously, jet fuel did not came back. It's not about to come back, but activities on the road is is resuming.
A bit of improvement in crude and automotive, which was at a hard stop in May, came back and has reopened. When we got to so broadly speaking, in the month of July, we met demand that was available to us, and that's an important point as we talked to August. So the month of August, we were up 4% sequentially from the month of July. We did not quite meet all of the demand in the month of August as it relates to calling back crews, you know, that we we did call back in the month of July, but they're not now. They're finally all in to start the month of September.
So the month of August, the demand for domestic intermodal and and international intermodal was also strong. There was less blank sailings in its in the shipping rotation. But, also, in some cases, there were extra loaders, because there's product in in Asia that was waiting to be able to get on ship. There was there's a backlog. There's still today a bit of a backlog of containers back in Asia to make it North America.
Lumber, I think those of you who follow what's happening in the housing starts and renovation and at home spending know that lumber industry is extremely strong. The the the sawmill are running at capacity, and they can't quite meet capacity. Therefore, the price of lumber is up. The demand for center beam is also strong. We're not meeting all the demand.
The demand is strong. And the export to China probably slowed down because the price of China is nothing like the price of United States. Canadian grain has remained strong unusually strong all summer. And as I said, we actually set a company CN company record, all time record in the month of August at roughly 2,300,000 tons. And then now that our crews, most of them are back, I'm talking train crews, we should have a very, very solid month of September.
In the month of August, there's probably $15,000,000 $20,000,000 of business that we could not move because we the resource were coming back, but not quite all there at that time. If we go to the next page, which is specifically talking to operation, we have rightsized our resource. You remember that we had significant layoff at CN since the beginning of the pandemic. The the peak of people being on on on unemployment insurance was the month of May. At that time, we had 2,800 of our crews which were furloughed.
We're now down to only a thousand of our crews being furloughed. 1,800 of these employees have been recalled. A lot of them have been recalled during month of July. Just as a reminder, in in Canada, when you recall, an employ a union employee, a train cruise, from the time you pick up the phone and call them, it's two weeks, before they come back to work. Because of the pandemic and the nice summer, just about all of them have taken the two weeks before coming back.
And because they've been out of work for, long enough, we we we need to provide them with some training, safety training refresher, which is which is an extra week. So from the time you recall a person back to work and the time they become productive, there's about a three to four weeks lag in Canada, and it's about four to five weeks lags in The US. So right now, we're down to about 1,000 employees to call back, and we hope that we can do we can recall most of them sometime in the fall as business, you know, come back. Just on that point, yesterday, I was talking to an exec top executive of one of the global, like, container terminal operator in the world as well as a big infrastructure fund. And when you look at a container business in the world as one of the indicator where the economy is all at, the it's an actual movement of container right now.
It only seems to be about 6% below last year at the same time. So what that mean is, I mean, broadly speaking, obviously, you have different geographic pocket, but broadly speaking, the economy is on its way back in term of trade activities, at least on the container side. And the part which is really, really stalled because the part has is very concentrated. It's, you know, like airport, obviously, are not doing well at all. Airline are not doing well at all.
Restaurant, mall, shopping centers, park, etcetera, etcetera. But many other sector are really doing much better and on their way to be able to have a decent end of the year. On the other aspect on the cost side that we focus to make sure we come out of the pandemic with better cost than what we came in. As obviously, like other companies, we have a number of employees who are now gonna be working from home permanently, not so much between now and year end, but we've identified a number of jobs that would be done at all time, permanently from home. And and other people who are working at also office workers, sort of what we call the a and b team concept, have started to come back to work at the office in term of one week on, one week off, one week at at the office, one week at home, and and rotating that way.
So this way, we diminish the density of the office workers in our building at the same time as reconnecting employees with their team members and the company strategy in a way that is is, in many ways, somewhat better than what you could do just by using the the the the video conference. Operation on the operation side, there is some yard and some activities on mechanical side, mechanical shops, and the way we do work in engineering that, you know, will be permanent cost savings. You look at our train length and train weight, obviously, you could see the red bar. Our train and train weight are up and that's a testament to basically managing costs. Although, as I said in the month of August, we were a little tight on resource.
So in the month of September, we would be in better shape to meet most or all of the demand. And our focus on the on on the ESG remain very, very strong for a company like CN in in the supply chain. Our carbon footprint is obviously top of mind. In the month of July, we set another company record in term of fuel efficiencies. We've we've we were 3% better than July, and July was actually extremely strong, saving 14,000 ton of c o two, but also saving saving money.
You know, diesel is diesel is not free, and every time you save on diesel, you save money. And we we we feel confident that these fuel efficiencies will stay with us and over time and and and over time improve. And another tidbit of item, we have placed an order to buy 50 electric truck. They will only be delivered in the 2021, and that's also in the mindset of, you know, innovating in the space of our intermodal network and and starting to use other technologies than just regular, class a truck to do the local delivery of our container. And finally, on that point, we have a c our new CTO, chief technology officer, joined CN on September 1.
He actually comes from a very strong technology background. He was at GE Transportation and at Wabtec, you know, building locomotive and been involved in the PTC implementation. So Dominik will be a very strong contributor to our technology push to automate everything that we can in the rail operation and in the rail industry with a very strong engineering background the last twenty years in in the space of rail automation and rail technology. At that point, I'm gonna pass it on to Keith to talk specifically about intermodal. Sure.
Thank you, JJ. We're gonna break down my piece on intermodal into three different parts. One, international intermodal, the
next domestic, and then we'll talk about the future of intermodal and and our facilities. So on the first, the the unique 3 Coast access to North America that we have with our network, we're very, very pleased and and honored, and and, you know, we we we feel very confident that this network is something that's a differentiator for us. It's our gateways of trade, and it's very relevant now with what's going on in the consumer economy, what's going on in the world trade. As supply chains move from different parts of Asia to Southern to Southern Asia and as people discuss near shoring, those types of things, we think that our network is still relevant, will continue to be relevant, and the structural advantages that we have will be there for the long term. And to to to strengthen that, to bolster that, we work with our partners, the terminal operators, the port authorities to increase the capacity.
And as you see in the Port Of Prince Rupert, there's expansion plans. Port Of Vancouver has been and will continue to expand. Port of Halifax and PSA are making expansion plans. And we also have plans with Hutchinson to build a new terminal, Port Of Quebec City. But when you go down south, there's also expansion plans in New Orleans, and and and there's been a new port built for the Port Of Mobile with APMT.
So the three coasts are covered. We have the ability to move with the changes in supply chains to react quickly as our carriers and the customers that they haul business from all over the world through these gateways, we're able to react quickly. In fact, when the Montreal strike occurred at the at the port here in Montreal, we were able to react and and use the Port Of Saint John, the Port Of Halifax as additional ways to get into the gateway of Montreal, Toronto, and The US Midwest. So, again, just another proof point to show that our network is advantaged, and we have the ability to react very quickly. Wanna move to the next page where we talk about domestic intermodal.
We've seen with the changes in the economy, the reaction to COVID and a lot of the the things that JJ mentioned earlier about, people staying at home but but changing their purchasing habits, purchasing more, purchasing more of, the home items. So we have, we have worked very closely with all of our multiple sales channels that we have to to find out the the changes that are happening in the in the supply chains, who the partners are, what changes they need to make in order to be successful as these changes occur. And so we we are blessed that we have multiple products and services to to be able to be used in those various supply chains, and we also have multiple sales channels to be able to participate in those supply chains. You know, we saw this coming several years ago. This is not our we're not able to react, as quickly as we are because, because of luck.
It's been it's been great planning. It's why we made the acquisitions of TransX and H and R as we see the the refrigerated products, the temperature controlled segment is growing very, very rapidly this year. And because of our acquisitions, we've been able to participate in that new supply chain that that the growth that's happening in that supply chain. That's one of our sales channels. Another sales channel is our own CN retail product where we have our own cold supply chain business, and we've been participating in that.
They're they're different customers for the most part in those various supply chains, and the and the different multiple sales channels allow us to participate in all of them. When we look at the other sales channels that we have, we have the EMPs. So that's more of the IMCs that are crossing the border from The US Southwest with the UP and coming into Canada, and then The US Southeast with the NS coming into Canada. That's another sales channel that we participate in. And then we work very, very closely with our wholesale partners in Canada.
Our we're very unique in in in our intermodal business that we have a retail channel, and we also have wholesale partners that we work with. And some of the ones that we work very closely with, with these, different supply chains that are they're evolving are MO, TFI, Clayson. There's multiple others, and we work independently with each one of them as they deepen their, their hooks and their their, grasp of these different supply chains. We work with them on their cost structures to make them, win in the market. And, it's it's just another product, another service, and another sales channel that we use.
Finally, on the domestic repositioning, what that is is working with our lines to take their boxes that have made it into the hinterland as they are coming across our network with the 40 foot container or the 20 foot container. And we work with them to get that box back to the coast in an economical fashion for them. We use that box to move domestic goods. It's a win win situation. It it increases our capacity.
It reduces their cost, and it gets the boxes to where they need to be to get an export for overseas. And then finally, the CSX partnership that we've developed over the Port Of New York, New Jersey, and Philadelphia has been very, very successful. Again, with what's changing in the economy and with the different supply chains that are evolving over the last five, six months. Because we had this planning, we've been able to participate in this. In fact, some of the vessels that were diverted off of Montreal during the strike actually went through New York, New Jersey, or Philly, and we were able to participate in those movements back into Canada based upon that partnership that we've developed.
The last piece that I'd like
to talk about is the building the intermodal of the future. We know that in order to compete down the road with the truck that we have to not only be safer, more efficient, but we also have to be more customer centric. And that's our thinking. And as we develop our our terminals of the future, We're using our Brampton Intermodal Terminal as our as our mini sandbox to play in to find out how do we evolve our terminal structures, how to evolve our processes to be safer, more efficient, and more customer focused. The first thing that we did was yard design.
If we if we redesign our yards to be, more productive, have more capacity, and be able to provide higher service levels, then we're gonna be much more successful. We redesigned our yard using some help from some industrial engineers. We actually are able to put more containers in our yard. We're able to decongest the decongest the movements of trucks and our equipment through the yard, which means we have more capacity. We also are safer, and we provide a better service for our customers or their surrogates, their truckers that come in and out of our terminals.
As we wanna be lower cost, always working on our cost structure, we've put telematics. So we put, devices on all of our cranes and all of our shunt trucks. Anything that we roll we move around the yard in, we put telematics on those. So now we know where everything is. We're able to, backcast some of the, events of a day or a week, learn who's more productive.
And and we're taking all of that data, and we're using that to evolve how we operate our terminals to be traveling less. We view our terminals as an outdoor distribution center. And by having these telematics with all of this rolling stock, we can be better planners and better operators moving forward. As the demographics of our workers are changing, we must change with, the times as well. That's why a lot of the technology that we're implementing in our terminals with our smart screens and our smart maps, they're more geared towards the, the newer generation of, operators that we have.
And, you know, where we were fearful that, bringing on more technology was going to, negatively influence our workforce, it's actually the reverse. They're screaming out for it. They're asking us why we waited so long to implement them. So the so the change the process change, the behavioral changes have been very, very easy compared to what we initially thought. These types of, devices are also giving our frontline supervisors more tools to manage better, to be safer, more efficient, and actually provide a better experience for our customers.
And finally, by building all of those foundational aspects to this intermodal of the future, We're gonna be implementing new operating systems that will help us with decision making. It will take out wasteful movements of our cranes and our shunt trucks, and ultimately, someday will lead to the ability for us to do new and adventurous things with how we operate these terminals, maybe autonomously or with with with, you know, different types of operating mechanisms, different cranes. We we ultimately wanna get to, do things like our partners are doing that we see overseas with the way that they operate their terminals in these large ocean terminals. So with that, Paul and Kanar,
thank you. K. So Perfect. We'll we'll go back with you, Kanar. Yep.
Thank you. Yeah. Thanks. That that was a great update on on the overall business and and the intermodal, Keith. Thanks so much.
So maybe we can, you know, kick off with something that you touched upon, JJ, before we go into in-depth Q and A. So on the T and E employees that you are recalling, I just wanted to kind of understand better. With the peak season upon us here, how prepared are you for that with the recalls of these employees? And what else needs to be done to get to have supply and capacity in line with demand that you expect for the PCM?
Yes. Thank you. Very good question because we are focused on growth. We're focusing on pivoting to growth and helping the economy to restart. So we have recall quite a number of our employee in the month of July, and they're rolling in, in the month of August.
And as I said, as they roll in here mid August and late August, they're becoming requalified after their five trips to be on their own with running extra train. We are in some places, we're adding frequency of local service from say two days a week to three days a week or three days a week to five days a week to be able to meet the demand. On the grain side, our fleet of hopper cars have been inspected. It's coming out of storage. It's going in preposition.
Our orders with National Steel will they're going to be making most of the cars in the fall. We'll take most of them, position of them in the first January. We might actually advance delivery of some of those in December. We'll make that decision later in a couple of weeks as to what how much of that we do. Locomotive fleet, we still have locomotive in storage, but we're rolling back equipment.
So it's really three things. One is we're careful about how many railcars we bring back in service. We don't want to create congestion. So the first thing that we call back is crews, making sure that we have crews to run the train. Second thing is that we deploy some more locomotive as the crews are coming back and being requalified.
And then the other thing is the rolling stock. So the as much as we had a good month of July, we're very happy with July. The month of August was actually a little better than what we thought. That's what I said that the resource gain were a little tight. Western Canadian business, for example, is our areas of most promising short term results.
And intermodal is part of that because there's quite a bit of business coming out of at the port quarter to date, the week 35 CN on the Canadian railroad side, CN is only down 3% on total intermodal business, that's domestic and international and the other railroad is down about 10%. So we've got good demand coming in for both Canadian cities and U. S. Cities. In fact, I think I was looking at the stat this morning, intermodal port business going to U.
S. Cities is almost at par to last year, what it was last year at this time, and it's only down a bit on the Canadian cities. So we are getting set up for a good fall peak. Business mix, obviously, is a little different, but mix of business is different every year. So this year is, you know, energies and crude is way down and other commodities are picking it up.
So we're getting set up for continued improvement in sequential growth, and that's why we're deploying the resource to be able to do that.
Perfect. Thanks for that. So maybe we can dig into the intermodal. You mentioned about the international and domestic trends there. If we were to think about the mix between domestic and international intermodal with respect to, let's say, revenue or margins, how does that compare to the prior years?
And what have you learned in this pandemic about the cyclicality or resiliency of this segment based on the footprint you have?
Keith, do you want to take that? Sure. If you're looking at the what's changed this year from others, I would say that we're dealing in our intermodal business less with the industrial business that we that we have in the past. We're not maybe moving as much of the manufacturing in intermodal equipment as we have in the past. However, on the consumer side, whether it's grocery products or whether it's retailers or etailers, the ecommerce commerce business, we're moving more than ever.
And it's, again, one of those things that we plan for, JJ. I mean, you know, my title is SVP of consumer products. It's why we split the CMO role in the first place to give myself and James some some room to move and to strategize about how we're gonna play in the new economies. So we've been prepared for it. We're able to extract the value out of these changes now because of being prepared for it.
The acquisitions of TransX and H and R have accentuated or accelerated this this. And we also are working very closely with all of our partners, whether they're the wholesalers in The in Canada or the IMCs in The States to, to participate in this. And then as I said before, the the the network that we have is unique. It is structurally advantaged over others, and, we we don't take that lightly. And, these multiple gateways, multiple optionality that customers have to get into North America to The US Midwest, we make sure that we use it and don't abuse it.
Great. Thanks for that. You you mentioned, Keith, about TransX and H and R, obviously, and how they have sort of benefited you guys during this kind of time frame for high demand for our consumer products. If you can help us understand to what extent have you already seen the benefits of TransX and H and R that you were expecting? And is there room for further growth or margin expansion from here?
Yes. Thank you very much for the question. The we had an investment thesis, and it was that we wanted to grow our rail business in intermodal, which we've been able to do. We've taken a lot of the truck business, the traditional truck business that TransX may have done, and converted that to rail. We also said that we wanted to add, talent value to CN.
We've done that. Numerous people inside of TransX are participating in other parts of CN business, whether it's strategy or whether it's, interestingly enough, community affairs, those types of things. So the the second piece of adding talent into CN has done very well for us too. We also said that we wanted to take TransX and make it the best in the business from an operating ratio standpoint of of its like, businesses, you know, whether it's a a TFI or JB Hunt. At at that point, we have done that as well.
They are on par with with, those businesses that are like, and similar in the products and services that they deliver. Is there room for improvement? Yes. There is. We have just begun to to, kinda integrate our fleet of, assets between H and R, TransX, and our traditional CN fleets, taking out empty miles as they move across the network.
As we get better and better and better at that, we'll see margin improvement. But we're also going to see gains on the revenue side as we get deeper and deeper with the customers that they have and deeper and deeper with the blue chip customers that we have at CN who maybe we don't provide the level of service that they need. We will be we we're giving the transaction, the H and R folks a lot of leeway to come in and provide those higher levels of, you know, more touch points, more white glove type service with those customers so that we can, get into the, additional revenue streams that maybe we have not been able to.
Okay. Thanks for that. And then just moving on to switching gears to international intermodal, perhaps I don't know if JJ or Keith, you want to take it. So we have learned recently that imports on the West Coast are surging this quarter, both in California and DC, which is kind of causing port congestion and higher dwell times. So how are you managing operations on the West Coast and your customer expectations through this period of high demand?
Yes, maybe I can take that one, Konark. So as you mentioned as we mentioned earlier, there was a time there was a lot blank savings in the rotation on the Transpacific trade. And then eventually, we went from a lot of blank sailings to no blank sailings to eventually no blank sailings and some extra loaders. So there was a slowdown then a surge on the West Coast, and that surge has caused some because it came fairly quickly in a matter of a couple of weeks from, you know, less than two months from bottom to peak. So there has been some congestion broadly speaking in the West Coast.
And that's partly why also our intermodal business in total is only down 3% from last year quarter to date because there's good business in the West Coast. On the import side, the retailers are brick and mortars, but ecommerce are, you know, stocking up. As as as a consumer yourself, probably you have noticed that if you were shopping in the month of late late June and July, there were many stores which, you know, they had some not all the shelf were full, so but that situation is resuming itself. But it is part of the reason why we are recalling crews and pulling local Nevada storage is to handle the businesses available to us. And as I said that they had there was a couple of weeks lag in term of crew recall.
We've been recalling quite a few crews, but maybe we could have recalled them two weeks earlier. And and then in the month of September, I think you will see that we we will deal with that surge in the intermodal September, October, November in a way that we maintain the port very fluid. Our freight forwarding team in China tell us that right now, when they try to book containers to go from China to Canada, they basically all the vessel sold out or most of them sold out between now and early October. So that gives you a sense that the vessel arriving in September and October, till all the way to the October are probably gonna be quite busy and quite full. And so it bodes well.
And it's the reason why we feel we feel confident about the recall of our crews that we're gonna be able to them busy. Thank you.
Great. That's great, Jay. Thanks. And if I can follow-up maybe with respect to the West Coast. So like we have seen congestion in Vancouver, obviously, in California as well.
How has has Prince Rupert fared during this time? Have you seen similar congestion issues at Rupert? Or have you seen any benefits there? And then if you can help us understand, obviously, over time, Prince Rupert has gained a lot of market share from the Westport, Vancouver, and others in The US. Do do you expect to see more of that going forward as well?
Maybe I just can start. Rupert has been busy. Some congestion, but we we we're dealing with it as we speak. And quarter to date, I think Rupert is about the same vessel volume count than last year at the same time.
So, Keith, you wanna talk about kinda where they're at? Yeah. So Prince Rupert, it is it is unique. It's unique in the fact that there's one operator, one railroad. And so we are able to do a few things a little differently to try and get them caught up maybe quicker because of that less complexity.
Know, there's not four port terminals there. There's just one. So that is one maybe advantage that you see in Rupert. The other thing is that we are continuing to invest not only in the BC South, but the BC North. So Rupert, we have three new sidings that are going in.
One is to be completed by the September, and the others will be completed by the end of the year. We're in lockstep with DP World as they continue to expand their terminal another 450,000 TEUs by the 2023. We'll get one slug of roughly 200, two fifty in 2022, and then the final will be completed in 2023. We're staying in lock step with that with regard to capacity along our main line. So, you know, we we are have been a little congested.
The average dwell times are not probably as high as they have been in some of the terminals in Vancouver, but they're higher than what we want. And as the crews have come back and as JJ talked about that, we are seeing the velocity of our fleet improved. When people say you're short railcars, we're not short railcars. What we are is we're short of the railcars getting to the destination and the time as timely as we want. So the velocity is improving because of the crews being recalled, and we will get caught up here on the
West Coast, as JJ said. And just as an add on, we have also those people that we had hired in the spring to be trained and take the full six months training to become full time conductor, we had suspended this training class. We have now resumed the training of people who are to join the railroad on a permanent basis. So we have about 1,000 people to recall, which are qualified and we've also resumed the training of those who were basically being hired from the street and we restarted the training of that. We reopened the training center last month, this month in preparation for what we foresee as a, you know, decent demand in 02/2021, and Intermodal is one of those sector.
Thank you. That makes sense. Thank you for that. Yes. Maybe just to kind of touching on Rupert, I think Keith you mentioned about obviously the expansion that's underway for the next two, three years here.
If can walk through your kind of agenda for that expansion, how do you want to kind of or what kind of steps are you taking to ensure that your network remains fluid when demand kind of continues this way or it returns to sort of more normal and the expansion is underway? I mean, we have seen in the past that there's been some issues when construction has been underway at Rupert. So how are you kind of preparing for the next expansion phase to make your network keeping fluid?
Yeah. So Rupert to us is much more than just the container business that we do with TP World and their expansion plan, and that's we're supporting that very strongly. But Rupert is also a story of other commodities. AltaGas propane export terminal has been a success. They're actually talking about doing an expansion of their capacity so that more propane from Alberta could be exported.
You know about Pembina, was also in Watson Allen building a propane export terminal and it should be in operation maybe six months from now. There's obviously RTI, was exporting coal. RTI had equipment breakdown during the month of August. So their run rate for total export of coal, whether it's thermal coal, steel coal or pet coke has slowed down, but they're fixing the equipment and they'll be back sometime in September at the same pace. And we've been generating a lot of effort to make sure that these containers going back to the on the ships have something in it that's just not moving that there.
So we have bagging, we've worked with a partner of ours to have a plastic pallets bagging line to be installed at the Port Of France Superd itself. One is in operation, second one is about to be put in and is committed, he has enough business to commit for a third line. So some of what you see in Texas, for example, as being plastic pellets has been an export story for containers is also true for Rupert. We have two large plastic pallet producers in Alberta, who are increasingly using Rupert as the export gateway for their products. So we roll hopper cars to Rupert itself, bag locally and then truck it to the port.
So all that to say that we're very bullish about the future of that rail line. We're very bullish in general to trade with The Pacific still today despite the slow circular change towards East Coast because of factories moving to other countries than just China. But the trade in Trans Pacific will stay strong for containers and commodities. As Keith mentioned, we're building three siding this year, one in October, two will be there before the winter sets in, and we have plan to add some siding next year as well. You may remember discussion from maybe a year ago, there's a national there's a program with the federal government and the Port Of Prince Rupert about adding infrastructure at the port itself.
That was a twenty four to thirty months project, which is still ongoing, etcetera, etcetera. So we intend to be a leader on the West Coast. Our overall vision for the company in total is to be a leading North American rail supply chain solution providers And definitely the West Coast is a big part of that. And Rupert, because of its potential and the fact that we only a rail carrier reserve that gateway is very much for front and center of our capital program. And just briefly talking about CapEx, we are a growth company.
We're a company who is focusing also on technology to lower our costs further. So our CapEx program will be maintained. We did not reduce our CapEx this year because of the pandemic. And you will see CN continue to be focused into investing in our business when we can find a good return. And at this point, I would say that we have enough projects that provide a good return that we will continue to invest this year and next year as well.
Okay, perfect. Well, that's great, JJ. Thanks. And just lastly, maybe on your East Coast strategy that we have kind of heard about quite a few times here. Maybe we can talk about quickly on what sort of progress has been made so far by you guys and by your partners to support your East Coast strategy?
And then what is it that you're expecting from the East Coast network, be it in terms of intermodal or any of the commodities? And how should we think about the East Coast compared to the West Coast and Rupert that you have today?
Yeah. Keith, you wanna take that? We're competing hard with the Port Of New York and New Jersey.
Sure. You know, we service we service two ports two terminals actually in Halifax. We service the Port Of Saint John. We go there. We have gone there for a long time.
We've been supporting customers like MSC and CMA through, Saint John for quite a while now. And, and we have, growth aspirations. We believe that there's capacity that needs to be put in place in the East Coast, and that's why we're, we've put together a partnership there with Hutchinson in in Quebec City. The same attributes that Prince Rupert have on the West Coast, we feel are there in the East Coast. It's a it's a the first gateway you get to when you come out of, out of Europe or you're coming out of the Suez.
And the Suez is servicing all of Southeast Asia where a lot of the manufacturing is going. So, you know, although we are into New York and New Jersey and Philly with our partnership with CSX, those are different strings that are coming in versus the ones that we're talking about that would be coming into Halifax or coming into Quebec City or probably they're even coming into Saint John. So, you know, we feel that, we're supporting our partners there on the East Coast, with with our ability to to help design a rail and port terminal infrastructure ecosystem that is gonna be state of the art such as in Quebec City, or we're working with PSA to redesign what's going on there in Halifax to be even more efficient than we are today. We're also using our inland terminals more effectively. Similar to what we do on the West Coast with maybe Prince George, we're looking at doing the same thing in Moncton and a couple of other places to support the exports to go back out as we are attracting new customers to come over the East Coast terminals that we service.
We're working on their cost and and economics to have the exports go out so it improves their round trip economics and and and creates a want or a need for them to come in with bigger vessels. And when they come in bigger vessels, we grow, they grow.
Thank you. Perfect. That's great. And then maybe just we can just conclude. I think we're running out of time here.
If you have any kind of, you know, closing remarks and, you know, maybe as well, you can touch upon the technology investments, JJ, that you have been making. We heard about your CITO appointment, so maybe you can touch on that. And then what kind of cost benefits do you or cost saving benefits do you anticipate from technology investment that you have been making over time And where are you at this point? Thanks.
Okay, thank you. So maybe in closing here, just to restate the CN's vision is our vision is to be the leading North American rail supply chain solution providers. We intend to accelerate efficiencies in operation, and this is where automation and digitization come in and people like Dominik role in helping us in reducing costs and improving our operating ratio. We intend to grow to feed our rail network with either organic growth from what we talked today or also adding adjacent supply chain business like we bought TransX, which is a net world company that we want to run with a leading operating ratio compared to HPL at TFI and GB Hunt. We want to help our customers in their market to be for them to want to do more business with CN.
As an example, we want to do more real time visibility for those of us who use our services. And when you get to innovation and that's where the support grow, this is where technology will also play a role. And in some cases from time to time, we want to be a disruptor. Like when we made the announcement yesterday of buying this electric truck, we might be early days, but at the same time, new technology is coming into our space sometime as a way to help our costs, sometime as a way that put more pressure on our industry from a competitive point of And in the case of electric truck, it's basically a way to look at how we can minimize our carbon footprint as eventually when you look out five, ten years, the question of price of diesel, but maybe more relevant for potential carbon tax is something that we need to address early on. I think my view is that at CN, we've been a pioneer in many, many areas of how we can improve operating costs, sweat assets and grow faster than the economy.
Many of what we the things we've done in the past, people early days, know, they were naysayers, they didn't quite follow right away. But the truth is the rail industry is a lot of a copycat industry. First things people say it won't work, and then guess what, four or three years later, they follow and they do this and they embrace the model, whether it's the Rupert of the East, whether it's the lower operating ratio, whether it's up, you know, scheduled railroading, whether it's using technology to inspect track and inspect train, all of these things today. We're a strong believer in these things and we know it, we believe in time when these become competitive edge, some of our peer will probably want to copycat us. But hopefully by that time, we have a couple of years of advantage.
Thank you. I think we're at the end of our time.
Perfect. No. On that note, thank you so much again, JJ, Keith and Paul for your time and everybody in the audience as well. Thank you. Thank you.
Thank you, Konark.
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.