Leading Canadian railroad
Canadian National Railway
) has entered into a multi-year agreement with Superior Silica
Sands LLC for transporting frac sand from a new processing plant at
Northern Wisconsin. Consequently, Canadian National will invest $35
million to build rail infrastructure in Wisconsin to serve Superior
Silica and other business prospects.
Canadian National's $35 million project includes 40 miles track
restoration work between Ladysmith and Barron, improvement of rail
and replacement of railway tie, repair culverts and bridges, and
enhancement of rail services across the Wisconsin network. The
Barron Subdivision will connect to Canadian National's North
American rail network at Ladysmith and will be in service later
Currently, Superior Silica's 85 acres of plant remains under
construction. The company is also constructing a rail storage
facility neighboring Canadian National's Barron Subdivision. Upon
construction, Canadian National is expected to ship 2.4 million
tons of frac sand per year from the new facility.
We believe growing demand for natural gas and petroleum products
are potential factors driving demand for frac sand, which is used
in hydraulic fracturing in the petroleum industry. Over the near
term and beyond, we expect this demand to remain strong propelling
potential business opportunity for Canadian National.
However, headwinds related to fuel cost, lower-utility coal
shipments, poor U.S. grain export along with lower U.S. corn
production and competition from peers like
Canadian Pacific Railway Ltd.
) remain near-term concerns.
We have a Neutral recommendation on Canadian National supported
by a Zacks #3 Rank (Hold).
CDN NATL RY CO (CNI): Free Stock Analysis
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