Canadian Pacific Railway’s pending acquisition of Kansas City Southern Railway will enhance competitiveness in the North America supply chain, says University of Manitoba professor Dr. Barry Prentice. “First of all, I think it’s a really good thing because it does combine the two smaller of the Class 1 railways together to make them a little bigger and more competitive with the others,” said Dr. Prentice. “I see it as a competitive benefit because it’s an end-to-end merger,” Dr. Prentice added. “You’re linking on another railway to service an area. There’s almost no overlap between the two rail networks.”

The US$31 billion merger, which is still awaiting approval from the Surface Transportation Board in the U.S., would extend the CP line deep into Mexico all the way to the port of Lázaro Cárdenas on the Pacific

Coast, about 350 kilometres northwest of Acapulco. “While remaining the smallest of six U.S. Class 1 railroads by revenue, the combined company will be a much larger and more competitive network, operating approximately 20,000 miles of rail, employing close to 20,000 people and generating total revenues of approximately $8.7 billion based on 2020 actual revenues,” CP said in a news release in March 2021 following its first bid to buy KCS.


In a presentation during a first quarter 2022 earnings call, Keith Creel, CP’s President and CEO, said he anticipated a ruling from the STB in early 2023 at the latest. The process had been stalled while the STB sought clarification of some data from CP, “which we have done,” Mr. Creel said. “We’re certainly optimistic things will be restarted soon.”

Aside from concerns raised by the other three Class 1 railways, Dr. Prentice said, “I haven’t read anything about anybody saying, ‘No, that’s a bad idea.’” He expects other major railways to balk at the deal. “But it’s not like we see a bunch of shippers and others that are complaining.” Dr. Prentice said CP might have to grant concessions to other railways, such as to access gateways. “But that’s another matter.”

Dr. Michael Haughton, a professor of supply chain management at Wilfrid Laurier University, noted that the proposed merger will make CP a bigger player among all Class 1 railways. “Not just its Canadian competitor but its wider North American competitors,” Dr. Haughton said. It will also become important should reshoring of economic activities

  • such as the return of manufacturing
  • occur to a significant That’s because reshoring wouldn’t be locked into individual countries but to the continent as a whole. “It makes sense because acquiring another Class 1 railroad, that’s one thing, but supply chains operate effectively when all these links are integrated,” Dr. Haughton said. “As we all know, at the end of the road, it has to be a truck that takes it to the last mile.”


In March, CP announced that, in conjunction with KCS, it had “successfully launched the first dedicated international intermodal train between Lázaro Cárdenas and the U.S. Midwest.” Mr. Creel described it as “proof of concept and a sign of things to come” should STB approve the merger. “With STB approval, CPKC will work with its customers and invest in new infrastructure and train services to unlock the full potential of the combined network to offer unmatched supply chain alternatives and benefits compared to other rail options through congested ports and a real alternative to highway-clogging trucks,” Mr. Creel said in the March 8 news release. “I would envision creating a new Mexico Midwest Express interline service that could deliver all of these benefits.”


Rail to Mexico was the subject of a panel discussion in December at the University of Manitoba’s 26th anniversary Fields on Wheels Conference, which took place online. Mark Hemmes, who moderated that discussion, said that Mexico is already the fourth largest importer of Canadian grain at 2.3 million tonnes annually. That places Mexico behind only the U.S., China, and Japan.

“So being number 4 is a pretty predominant player in who we’re selling our grain to,” said Mr. Hemmes, President of Quorum Corporation, best known as Canada’s grain monitor.

Over half of that grain is canola seed and canola products, he added. The remainder includes wheat, durum wheat, and specialty crops. At present, though, only 13 per cent of that grain moves to Mexico from
Canada by rail. “The CP-KCS merger could likely provide a greater amount of opportunities to move by land because the majority of all of our exports to Mexico is going by ocean freight,” Mr. Hemmes said.

Asked if the merger would make movement of refrigerated goods between Canada and Mexico more feasible or desirable, CP’s Jon Harman said that a “single line haul definitely helps the speed of transit.” He compared railway interchanges to an airplane repeatedly landing and taking off. “So there’s always some incremental cost and time delay whenever you’d have to switch railroads like that,” said Mr. Harman, CP’s managing director of marketing, grain and fertilizer. “But when you’re one railroad, you can have visibility to the supply chain all the way through and your service design team and asset management team can plan further out, enabling smoother transition and smoother transit all the way through.”


Dr. Prentice, in an interview, said he researched transport of perishable products to Mexico and found that while carriers move lots of refrigerated containers within Canada on their own rail lines, “they won’t send them down to interline with another carrier.” Among the reasons for that were worries that the load might get lost or stalled. “The risk didn’t make sense for them when it was being handed off,” Dr. Prentice said. “But once it’s all under one rail line’s management, then I don’t see the same issue because Winnipeg to the border of Mexico is about the same as Winnipeg to Vancouver.” However, he added, “Once they’re inside Mexico, there may be some other issues.”

The Caxxor Group, meanwhile, is working on a major infrastructure project in Mexico that includes a new eight million TEU-capacity container terminal at Mazatlán that would link with a new railway to connect with the rest of the Mexican rail network, including the existing KCS line. “This project will transform the port of Mazatlán into the most efficient container handling facility on the planet,” said Kevin Kuly, Canadian managing partner for the Caxxor Group. “Our development will occur over three phases, the initial phase providing capacity for four million TEUs per year.”


The Mazatlán port and new railway are just part of larger privately funded T-MEC Corridor project that will have its northern terminus at Centreport in Winnipeg.

“This project truly will create a game-changing two-way freight network,” Mr. Kuly said. He envisions the project eliminating inefficiencies in North America’s existing trade infrastructure. Mr. Kuly didn’t provide an estimate of T-MEC’s full cost but news reports have described it as a US$3.3 billion project with the new port costing US$1 billion.

In 2019, trade volume in the U.S.-Canada-Mexico region was $1.17 trillion, only 15.9 per cent of global trade, Mr. Kuly said in his Fields on Wheels presentation.

“The total current estimated potential trade within the Americas alone is $22.5 trillion,” Mr. Kuly said.

While the new U.S.-Canada- Mexico trade agreement, which went into effect in 2020, “has spawned opportunities to eliminate supply side constraints,” Mr. Kuly noted that in 2018 only 1.4 per cent of Canadian exports were destined for Mexico and only 6.2 per cent of Canadian imports originated in Mexico. “It’s also important to note that this project, the T-MEC Corridor, is not being driven by the Canadian nor the American side of the equation. For Mexico, the U.S. East Coast and Canada represent a huge market potential for its products,” Mr. Kuly said. However, he added that Mexico also represents an opportunity for Canada and the U.S. “to access goods currently being produced from China and other Pacific Rim countries.”

Si-Port, as the new Mazatlan terminal is called, would have a container capacity greater than Canada’s five largest container ports combined. “Upon completion, Si-Port will rank number 20 of the top 20 wet ports in the world,” Mr. Kuly said. It will also be able to accommodate the largest containers ships of up to 30,000 TEUs that are expected to enter service by the end of this decade. The new railway promises to be another infrastructure marvel, covering 360 kilometres and built in five sections. Total cost of that part of the project is forecasted to be US$320 million and will include 96 kilometres of tunnels and 75 km of bridges and trestles.


Dr. Prentice noted that building a rail line through the Sierra Madres will present challenges. “Mexico itself is really not very ideal for rail,” he said. Nevertheless, he said both the new port at Mazatlán and the rail link are feasible. “I think it’s a matter of do they actually have the money and will they spend it?” Dr. Prentice said. “Because, as far as the geography goes, I don’t think there’s anything insurmountable in the way and there’s certainly rail lines to there that they can connect up with.” A bigger question, though, is “where are the destinations for those containers?” Dr. Prentice said.

Dr. Haughton, however, said the appropriate way to look at it would be as a “build it and they will come” proposal. “Sometimes infrastructure is built and then we start to see opportunities,” he said. “It’s like saying an invention is the mother of necessity rather than the mother of invention.”

The T-MEC project will also include four new logistics centres, in the Mexican states of Durango, Lerdo, Fonterra and Nava. “This will open efficient rail and road freight flow into the southern United States as well as to points north,” Mr. Kuly said. “Other facilities such as the Sinaloa Aerospace Park, a port within Texas, a port within Florida, and a port within Manitoba will also be developed to take advantage of these trade opportunities,” Mr. Kuly said.

The Texas part of the project recently hit a speed bump when the Mexican government said it would reroute the corridor away from Texas and into New Mexico to protest Texas Governor George Abbott’s move to increase inspections at the Mexico border, the Dallas News reported May 1.


Centreport CEO Diane Gray said in a Fields on Wheels presentation that her organization is working with the Caxxor Group on a strategy for how to link with Mexico. “We’ve spent a fair bit of time in the past looking at opportunities of how to improve the supply chain on fresh fruits and vegetables in particular from Mexico to Canada,” Ms. Gray said.

At present, many of those products aren’t imported from Mexico directly but come via the U.S., she noted. “So there are a lot of touch points before they make their way to Canada, which not only decreases freshness, but it drives up the overall cost of the product.” She added that Manitoba is also a major pork exporter to Mexico but there would be even greater opportunities for that with a more streamlined rail network.

In response to a question about the prospect of Centreport being perceived in Eastern Canada as too western-centric, Ms. Gray said, “It would benefit Canada as a whole, as opposed to just our capital region. Obviously, as a Canadian, I would like to see that.” Mr. Kuly, meanwhile, was asked when the T-MEC business plan would be presented to a larger technical audience to evaluate its feasibility. He said the Caxxor Group has approached multiple authorities and has been in conversation with governing bodies “for quite some time now.” He added that once the project details are no longer deemed confidential, they will be “made available to a broader audience.”