UPDATE 2-CN Rail expands fleet with car, container acquisitions

Tue Sep 4, 2012 5:14pm EDT

* CN says coal exports, intermodal market especially strong

* CN says spending more than usual

* Crude oil, frac sand shipments show big growth potential

Sept 4 (Reuters) - Canadian National Railway Co will invest a third more this year than it has in recent years to expand and upgrade its fleet of rail cars and containers, prompted by strength in the economy, a company official said on Tuesday.

CN, Canada's biggest railroad, said it is buying more than 2,200 new freight cars as well as 1,300 new containers as traffic increases in a number of its markets, notably the coal export market and intermodal sector.

Intermodal traffic involves transport of a wide variety of goods by more than one form of carrier, such as rail and truck.

The company declined to reveal the cost of the expansion, but CN Chief Marketing Officer Jean-Jacques Ruest said it is "probably a third more than the run rate we had in 2009, 2010 and 2011".

CN is making the investment "because the economy is better now and also because we have a significant focus on exports and the manufacturing side," Ruest said in an interview.

About three-quarters of the new rolling stock are additions, while about a quarter will replace older, less efficient equipment, Ruest said.

The largest addition is the purchase of 600 double-door box cars for forest products and metal shipments.

The new cars and containers will also be used to transport consumer goods, iron ore, steel, finished vehicles and grain.

Ruest said the markets offering the most growth promise for CN right now are crude oil, fertilizer and frac sand. Customers provide their own rail cars for shipments of these products.

CN started to test moving crude oils of various types to markets in Canada and the United States in 2010. Last year, CN moved about 5,000 cars of crude oil, and expects to move more than 30,000 carloads in 2012.

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