REFILE-CN Rail CEO says will meet Ottawa's grain shipment target

Wed Mar 12, 2014 6:55pm EDT

(Refiles to clarify that most, but not all, grains go directly to terminals, in last paragraph)

* Says huge backlog would exist even under ideal conditions

* Issued embargo notice to halt lumber shipments

* Trucker strike in Vancouver causing lumber backlog

* Says embargo not impacting or related to grain shipments

By Solarina Ho

TORONTO, March 12 (Reuters) - Canadian National Railway Co , the country's biggest railroad operator, said on Wednesday it will meet the federal government's order to ship 500,000 tonnes of grain a week, but its chief executive said there would still be a severe backlog even under ideal conditions.

Last week, the Canadian government ordered the country's two main rail companies to meet the weekly target in order to address a shipping backlog from a record crop of wheat and canola.

The enormous backup combined with a long and severe winter have resulted in overdue orders for tens of thousands of grain cars.

CN Rail CEO Claude Mongeau told investors at a conference in New York on Wednesday that the railway still needs to move 10 million tonnes of grain for export, noting that is twice the amount of potash it moves and as much as all its of lumber shipments in a year.

CN has already moved a record amount of grain from early September to early December - 22 percent more than average, Mongeau said, beating its best peak period in history.

"We'll meet the order and go from there," Mongeau added.

Had the size of last year's harvest been known earlier, Mongeau said grain elevator companies could have moved an additional 10,000 car loads of grain earlier in the season to clear inventory for storage.

"Under any scenario, even if the grain elevators had done what they could've done, even if we had no winter, we would still have a huge backlog," he said.

"I regret that the government has a accusative tone ... we shouldn't be singled out to give the impression that somehow it's a railroad problem."

The federal government's order took effect immediately and will last for 90 days, although it can be renewed. It also gives Canada's rail companies four weeks to ramp up deliveries.

Separately, Montreal-based CN said it placed an embargo on rail shipments to container-stuffing facilities in Vancouver last Sunday due to an ongoing strike by container truck drivers at Canada's largest port.

The facilities accept railcar shipments of products - in this case lumber - that need to be transferred into smaller containers, which are then trucked to the port.

"We put the embargo on to avoid any further backlog building up," said CN spokesman Jim Feeny. "We are looking for exemptions; if they're able to handle the railcar, we'll take them over."

The embargo only applied specifically to the Vancouver facilities and did not affect the bulk of grain shipments, he said.

The government order on grain shipments was not the reason for the embargo, Feeny added, as grains are typically shipped directly to the terminals and most do not go through the stuffing facilities. (Editing by G Crosse)