Canadian railroads sign deals with potash group

(Reuters) - Canadian Pacific Railway CP.TO said on Monday it has signed a 10-year agreement with Canpotex Ltd to transport the great majority of the marketing consortium's shipments of potash to the Pacific Coast port of Vancouver.

CP's larger rival, Canadian National Railway CNR.TO, also announced a 10-year hauling agreement with Canpotex, which is the marketing arm of Potash Corp POT.TO, Mosaic Co MOS.N and Agrium Inc AGU.TO, all of which mine potash, a fertilizer ingredient, in Western Canada.

Neither railroad gave details of the agreements, which take effect on July 1.

BMO Capital Markets analyst Fadi Chamoun said he estimated that CP had held on to around 80 percent of Canpotex’s volumes from the previous contract, with CN getting the balance.

“I had thought CN would get a little bit more than that... It is a modest positive for CP,” Chamoun said.

Under the agreement, CP will also transport Canpotex's potash shipments to Portland, Oregon, along with Union Pacific Corp UNP.N.

The agreement comes as CP, Canada’s second-biggest railway, is facing a proxy battle with activist investor William Ackman, who wants a former chief executive of CN to take the reins at CP and improve the efficiency of its operations more quickly than the company now plans.

CN will haul the potash on its southern British Columbia line. CN and Canpotex will also continue to study the feasibility of building a new potash export terminal at the port of Prince Rupert, British Columbia, north of Vancouver.

CP’s stock was down 73 Canadian cents at C$70.83 on the Toronto Stock Exchange on Monday afternoon, while CN’s was down 73 Canadian cents at C$78.95, in line with generally weaker North American railroad stocks.

Reporting by Bhaswati Mukhopadhyay in Bangalore and Nicole Mordant in Vancouver; Editing by Sriraj Kalluvila and Peter Galloway