Canadian Pacific Kansas City (CPKC) has reported a 2.2% increase in revenue ton-miles for the quarter to date, driven by growth in new markets and connections between Mexico and Canada. Despite volume being down 1.7%, measured by carloads and containers, CPKC's CEO Keith Creel attributes this to tough comparisons with the first quarter of 2025, when shippers rushed to beat looming U.S. tariffs.
CPKC has made significant progress in connecting new markets, enabling growth in the industry despite a challenging macro environment. The new network has been key to this success, and Creel believes that trade disagreements between the U.S. and Mexico and Canada will be resolved, likely with Mexico first. He notes that foreign investment in new manufacturing plants in Mexico has been waiting for resolution of trade disputes.
A renegotiated trade deal with Mexico is expected to provide certainty necessary for companies to invest in new facilities. In 2024, traffic between Mexico and Canada accounted for just 2% of CPKC's revenue, but this has increased to almost 3%, generating over $500 million in new incremental revenue. The company expects another $100 million this year.
CPKC is handling more shipments of french fries, grain, and petroleum products between the two countries. The launch of a dedicated intermodal train using their new interchange in Myrtlewood, Ala., on the former Meridian & Bigbee short line, will further enhance connectivity.
The new service, Southeast Mexico Express (SMX), will enable faster transportation from Atlanta to Monterrey in three days and middle Mexico in four days. CPKC's infrastructure upgrades will allow for 49-mph operation over the line, which stretches from Meridian, Miss., to the outskirts of Montgomery, Ala.
Creel emphasizes that building a new service requires upfront investment and growth. He notes that customers like Amazon, auto parts suppliers, and service-sensitive truckload customers will be attracted to the SMX service once it proves reliable.
CPKC is close to its merger-related goal of taking 64,000 truckloads off the highway annually. However, the slower-than-expected pace is due to excess truck capacity, low trucking rates, and the time it takes to roll out new initiatives like the Americold cold storage warehouse that opened this year.
Creel is skeptical of the 2 million truckload gain projected by Union Pacific and Norfolk Southern's proposed merger. He believes that converting highway freight to intermodal does not happen overnight and requires significant time and effort.
The railway industry is facing challenges such as trade tensions and economic uncertainty, but CPKC's focus on bridging the Mexico-Canada trade through the U.S. is bearing fruit.
