Canadian National Railway Company (CNI): PESTLE Analysis [Nov-2025 Updated]

You need to know where Canadian National Railway Company (CNI) is heading, especially with trade uncertainty shifting the tracks on their 2025 outlook. We've seen the company tighten its belt, maintaining a massive capital program of nearly C$3.4 billion while navigating everything from USMCA stability to the pressure of decarbonization. This breakdown cuts through the noise to show you the real political, economic, and technological levers that will drive CNI's performance and your investment decisions over the next year.

Political Factors: Trade, Tariffs, and the USMCA Anchor

The stability of cross-border trade under the USMCA (United States-Mexico-Canada Agreement) is defintely CNI's biggest political variable. Trade and tariff uncertainty forced the company to lower its 2025 adjusted diluted earnings per share (EPS) growth guidance to the mid to high single-digit range in July, down from 10%-15% earlier in the year. That's a direct hit on investor confidence. Plus, federal government rail safety legislation in both Canada and the U.S. drives up compliance costs, and any major infrastructure project, like a new rail line, still faces a slow, multi-year government approval process. The risk of freight rate re-regulation is low, but it's a constant shadow over the industry's pricing power.

Trade policy is the single biggest operational risk right now.

Economic Factors: Inflation vs. Operating Efficiency

North American GDP growth directly dictates freight demand; no surprise there. But the real fight is against inflation, specifically on fuel, labor, and materials, which impacts the operating ratio (OR)-operating expenses as a percentage of revenue. CNI's focus on tight cost control helped them improve their OR to 61.4% in Q3 2025, a solid performance in a tough environment. High interest rates also make CNI's substantial capital expenditure program, which is planned at approximately C$3.35 billion for 2025, more expensive to finance. Volatility in key commodity prices, like grain and crude oil, also shifts the revenue mix quickly, so you need to watch the US$60 to US$70 per barrel oil price assumption.

Here's the quick math: lower OR means more profit from every dollar of revenue.

Sociological Factors: Labor Risk and Customer Data Demand

The biggest internal sociological risk is labor negotiations. Ongoing talks with major unions continue to pose a real strike risk and put upward pressure on wages, which directly impacts the OR. We saw this play out in 2024, and the risk remains high. Separately, public perception of rail safety and environmental incidents heavily influences CNI's reputation, especially after any major derailment. Also, customers now demand transparent, real-time supply chain data, forcing CNI to invest heavily in digital platforms to meet that expectation. Recruiting and retaining skilled railway workers remains a challenge due to demographic shifts and the physical nature of the work.

Labor stability is a non-negotiable for network fluidity.

Technological Factors: Digitalization and System Security

Technology is a clear opportunity, but it requires massive capital. CNI is focused on full implementation and optimization of Positive Train Control (PTC) across its U.S. network, a huge regulatory and safety mandate. They are also sinking capital into digitalizing the supply chain to improve network fluidity and service reliability. This includes using predictive maintenance-AI and Internet of Things (IoT) sensors-to reduce equipment failures and delays, which is a key driver for improving the OR. But, as operations become more connected, the cybersecurity threat to operational technology (OT) systems is a growing and expensive concern.

AI-driven maintenance cuts down on costly downtime.

Legal Factors: Compliance and Litigation Exposure

CNI operates under strict legal frameworks, requiring adherence to Federal Railroad Administration (FRA) and Transport Canada safety mandates. These rules are non-stop and non-negotiable. The company also faces ongoing litigation risk related to derailments, land use, and property disputes, which can result in significant, unpredictable financial settlements. Plus, evolving data privacy laws for customer and employee information mean new compliance burdens, and labor laws governing collective bargaining agreements in both countries are always a factor in wage and strike risk. Legal compliance is a baseline operating cost that only ever seems to rise.

A single derailment can cost millions in fines and lawsuits.

Environmental Factors: Decarbonization and Climate Resilience

Environmental pressure is now a core financial factor. Investors and regulators are pushing CNI to meet aggressive carbon emission reduction targets, which means increased capital spending on fleet modernization to transition to lower-emission locomotives. This is a multi-year, multi-billion-dollar commitment. Also, climate change impacts, like extreme weather events (floods, fires, extreme cold), are increasing operational disruption and repair costs. Managing fuel efficiency and reducing greenhouse gas emissions is a top priority, not just for the planet, but for the bottom line, as fuel is a massive operating expense.

Extreme weather is now a line item on the P&L.

Canadian National Railway Company (CNI) - PESTLE Analysis: Political factors

Cross-border trade stability under the USMCA (United States-Mexico-Canada Agreement) is crucial.

The political stability of North American trade is the single biggest external variable for Canadian National Railway Company (CNI), given that roughly one-third of its freight originates in or is destined for the United States. The current environment is characterized by high uncertainty, largely driven by the U.S. administration's shifting tariff policies and the looming 2026 renegotiation of the USMCA (United States-Mexico-Canada Agreement). In early 2025, the U.S. briefly imposed a 25% tariff on most Canadian and Mexican imports, though this was quickly reversed.

This volatility directly impacts CNI's financial outlook. The company was forced to lower its 2025 earnings-per-share (EPS) growth guidance to the mid to high single-digit range, a significant cut from its original target of 10% to 15% growth, explicitly citing trade uncertainty. This is a real-time reflection of political risk translating into financial risk. For example, the company reported a 1% slip in quarterly revenue to C$4.3 billion due to trade upheaval, and its automotive revenue fell by 5%.

The political risk isn't just about tariffs; it's about trade flow predictability. Canada still benefits from a relatively low average effective tariff rate on U.S. exports, sitting at approximately 2.9% as of July 2025, but the threat of new, broad-based tariffs remains a headwind for key CNI commodities like metals and lumber.

Federal government rail safety legislation in Canada and the U.S. drives compliance costs.

Rail safety is a non-negotiable political priority in both Ottawa and Washington, meaning CNI must commit substantial capital to compliance, which is a constant, defintely rising cost. CNI's 2025 capital expenditure (CapEx) program is set at approximately C$3.4 billion (or $2.4 billion USD), with a significant portion directly tied to safety and infrastructure integrity. Specifically, about C$2.9 billion is allocated to maintenance and strategic infrastructure initiatives across the network.

Here's the quick math: CNI spent C$1.7 billion in 2024 just to maintain the safety and integrity of its track infrastructure, and a similar proportion of the 2025 budget is dedicated to this foundational work. This spending is driven by evolving regulations.

Key compliance drivers for 2025 include:

• Tank Car Compliance: The final deadline for retrofitting or replacing all remaining DOT-111 tank cars used to haul hazardous flammable liquids was set for the end of 2025.
• Brake Technology: New changes to the Railway Freight and Passenger Train Brake Inspection and Safety Rules are set to take effect in Canada in December 2025, requiring investment in new brake inspection technologies.
• Security Legislation: Bill C-33 in Canada is amending the Railway Safety Act to address increased security threats, which will necessitate new procedures and system upgrades for CNI's operations.

Government approval processes for major infrastructure projects, like new rail lines, remain slow.

While CNI is investing heavily in capacity, the timeline for bringing major projects online is heavily dictated by slow, multi-jurisdictional government approval processes. Even with a massive C$3.4 billion CapEx budget for 2025, projects are often multi-year endeavors that require extensive regulatory sign-off from federal, provincial/state, and municipal bodies.

The 2025 plan includes installing over 225 miles of new rail and completing approximately eight capacity-building projects in Western Canada by year-end. These are complex, government-regulated projects. Concrete examples of this time-intensive process include:

• Vancouver Fluidity: A multi-year project to improve capacity in the Greater Vancouver area, including an initial C$7.6 million investment in the Holdom Overpass project.
• Toronto Capacity: The advancement of Phase 2 of the new high-efficiency loading fuel terminal at MacMillan Yard in Vaughan, Ontario, following over C$60 million invested with project partners for Phase 1.

The need to secure environmental, land-use, and safety approvals for every mile of new track or yard expansion inherently stretches the project lifecycle, making capital deployment a slow burn, not a quick flip.

Potential for re-regulation of freight rates, though unlikely, is a constant industry risk.

The threat of re-regulation, while not a full return to pre-Staggers Act rules, is a persistent political risk that affects CNI's pricing power. The most direct, recent example of government intervention in pricing is the expansion of regulated interswitching in Canada.

Regulated interswitching is a process where the Canadian Transportation Agency (CTA) sets the rate a railway must charge to transfer freight to a connecting railway within a prescribed radius. This temporary expansion, legislated in 2023 through amendments to the Canada Transportation Act, means CNI has less control over the price for certain competitive movements. This political move is a clear mechanism for the government to step in and influence market dynamics when shippers complain about service or pricing, creating a ceiling on rates in specific, competitive corridors.

Here is a summary of the key financial and regulatory figures driving CNI's political risk profile:

Canadian National Railway Company (CNI) - PESTLE Analysis: Economic factors

The economic outlook for Canadian National Railway Company (CNI) in 2025 is a story of disciplined internal control meeting a mixed North American demand recovery. You should expect the company's operating ratio (OR) to benefit from lower fuel costs, but still face pressure from a substantial capital expenditure program and modest, though positive, freight volume growth.

CNI is guiding for an adjusted diluted Earnings Per Share (EPS) growth of between 10% and 15% for the full year 2025, a strong target that hinges on successfully managing these macro-economic variables. Honestly, a railroad's performance is a direct reflection of the economy it serves.

North American GDP growth directly dictates freight demand and intermodal volumes.

Freight demand is finally showing signs of sustained recovery in 2025 after a challenging period. CNI's own internal planning assumes a North American industrial production growth of approximately 1% for the year, a realistic baseline. The broader freight market is projected to see sustained year-over-year growth starting around May 2025, with a 12-month Freight Demand Indicator Forecast pointing to an average increase of 1.4%.

This modest growth is most visible in the intermodal segment, which is crucial for CNI as it represented 22% of their consolidated revenue in 2024. The Intermodal Association of North America (IANA) forecasts a total intermodal volume increase of 2.1% for the full year 2025. Domestic intermodal volumes are expected to climb by 3%, while international container traffic may grow by 2.8%. This segment is defintely a bright spot, driven by strong imports and consumer spending.

• Total Intermodal Volume Forecast (2025): +2.1%
• Domestic Intermodal Volume Growth: +3.0%
• CNI Industrial Production Assumption: +1.0%

Inflationary pressure on fuel, labor, and materials impacts the operating ratio.

The operating ratio (OR)-operating expenses as a percentage of revenue-is the single most important metric for a railroad. CNI reported a Q1 2025 OR of 63.4%, an improvement of 0.2 points, demonstrating tight cost control. The near-term opportunity is lower fuel costs, but the risk remains labor inflation.

Fuel is the second-largest cost for a railroad, right after labor. The U.S. Energy Information Administration (EIA) forecasts the average retail diesel price to be around $3.50 per gallon throughout 2025, which is a significant tailwind. However, labor costs are rising predictably. CNI recently secured a 3-year deal with Canadian conductors and locomotive engineers that includes annual wage increases of 3%, a fixed cost pressure you have to bake into your model. To offset this, the company is targeting a reduction in management labor costs by $75 million in 2026, showing a clear focus on productivity gains to protect the OR.

High interest rates affect the cost of financing CNI's substantial capital expenditure program.

CNI is committed to maintaining its network and expanding capacity, which requires significant capital expenditure (CapEx). For 2025, the company plans to invest approximately C$3.4 billion in its capital program, net of customer reimbursements. This is a massive investment, and the cost of financing it is directly tied to interest rates.

While the Federal Reserve's policy has generally kept rates elevated, the Secured Overnight Financing Rate (SOFR)-a key US base borrowing rate-is expected to range between 3.5% and 4.5% for the six-month term in 2025. This is a lower range than peak 2024 levels, which helps, but still means new debt or refinancing will be more expensive than the low-interest environment of a few years ago. Here's the quick math: a 100-basis-point rise in the cost of debt on just C$1 billion of new financing adds C$10 million to annual interest expense. The cost of capital is a real headwind on the return from that C$3.4 billion investment.

Volatility in key commodity prices (e.g., grain, coal, crude oil) shifts revenue mix.

CNI's revenue is diversified across seven key commodity groups, so volatility in any one market causes a shift in the revenue mix. The overall Aggregate Commodity Price Index is projected to decline by 1% in 2025, suggesting a general softening of pricing power.

In the energy sector, which makes up a substantial portion of CNI's Petroleum and Chemicals revenue (20% of 2024 revenue), the outlook is for lower prices. Brent crude oil is forecast to average around $64 per barrel in 2025, down from 2024 averages. This drop can reduce the value of the product being shipped, and therefore the revenue per carload. Conversely, the grain and agriculture segment is expected to see modest volume growth, which should provide a stable, if not surging, revenue stream. Coal, a smaller but still relevant segment at 5% of 2024 revenue, is projected to see prices fall throughout 2025.

Canadian National Railway Company (CNI) - PESTLE Analysis: Social factors

The social environment for Canadian National Railway Company (CNI) in 2025 is defined by a tight labor market, persistent public scrutiny over safety, and a non-negotiable demand from customers for digital transparency. You need to view these not as soft issues, but as hard operational costs and reputational risks that directly impact CNI's bottom line and competitive position.

The core challenge is balancing cost-cutting measures, like the recent labor force reductions, with the need to attract and retain the skilled, safety-conscious workers who are the backbone of the railway's operation. This is a human capital issue with a direct financial consequence.

Labor negotiations with major unions continue to pose strike risk and wage pressure.

While the immediate strike threat from the 2024 work stoppage has passed, labor relations remain a critical social factor. The dispute with the Teamsters Canada Rail Conference (TCRC), which represents approximately 6,000 conductors, engineers, and yard coordinators, was resolved in April 2025 through binding arbitration. The new three-year collective agreement, effective from January 1, 2024, through December 31, 2026, mandates an annual wage increase of 3% for these employees. This is a clear, fixed increase in CNI's operating expenses for the period.

However, CNI is simultaneously pursuing aggressive cost control. In the third quarter of 2025, the company announced an additional C$75 million in labor cost reductions, which included the layoff of approximately 400 management employees. This move, while boosting productivity (Gross Ton Miles per average number of employees increased 6% in Q3 2025), keeps the underlying tension high. Honesty, cutting management while the union eyes its next contract negotiation is a delicate dance.

The following table summarizes the key labor-related financial and social metrics as of 2025:

Public perception of rail safety and environmental incidents heavily influences reputation.

Public trust is fragile. A single major incident can erase years of positive reputation-building, and the sheer scale of rail operations means safety is a constant, high-stakes battle. In 2024, North America saw over 2,000 crossing accidents and 1,000 trespassing incidents. The numbers are stark:

• Canada recorded 261 incidents in 2024, resulting in 68 fatalities and 58 serious injuries.
• The US recorded 2,252 incidents in 2024, resulting in 268 fatalities and 749 serious injuries.

CNI actively manages this perception through initiatives like its annual Rail Safety Week in September 2025, which saw partnerships with over 376 municipalities in 2024. Still, the reality is that the public views every derailment or crossing collision as a failure of the railway, not just a shared responsibility. The weight ratio of a typical freight train-over 5,500 tonnes-makes any collision extremely dangerous, which amplifies the public's concern.

Demographic shifts create a challenge in recruiting and retaining skilled railway workers.

The railway industry, like many skilled trades, faces a demographic cliff, making recruitment a strategic imperative. The national labor market data for Canada in 2025 shows a drop in job vacancies in the Transportation and warehousing sector, which fell by 8,240 year-over-year as of March 2025. However, this sector still struggles with a skills mismatch, where demand for specialized technical and trade skills outstrips supply.

CNI is addressing this by focusing on talent pipelines. They are actively recruiting through job fairs, such as the event scheduled for November 2025 in Edmonton, Alberta, and by promoting an Early Career Program to transition top students into full-time roles. The Canadian government's immigration plan, targeting 395,000 skilled workers in 2025, offers a potential, defintely needed, source of new mechanical and technical talent for the rail network.

Increased customer demand for transparent, real-time supply chain data.

Customers-from grain shippers to intermodal clients-no longer accept black-box logistics. They demand to know exactly where their freight is, right now. CNI has responded by making digital transformation a core part of its 2025 strategy, backed by significant capital expenditure. The company plans to invest approximately C$3.4 billion in its capital program for 2025, with a focus on enhancing capacity and service quality.

A key initiative is a seven-year collaboration with Google Cloud to modernize technology. This partnership is designed to create an intuitive digital platform that uses Artificial Intelligence (AI) and machine learning to give customers much greater visibility throughout their logistics journey. This shift from simply moving freight to providing a data-rich service is essential for customer retention and intermodal growth, which is CNI's largest revenue stream.

• Customer demand is shifting supply chains, forcing CNI to focus on personalized experiences and enhanced shipment visibility.
• The capital investment of C$3.4 billion in 2025 is the concrete action CNI is taking to meet this demand.
• The new digital platform, powered by AI, is the direct solution for real-time, transparent data.

Canadian National Railway Company (CNI) - PESTLE Analysis: Technological factors

The technological landscape for Canadian National Railway Company (CNI) in 2025 is defined by a shift from federally-mandated safety compliance to an aggressive, data-driven optimization of the entire network. You need to see CNI's C$3.4 billion capital expenditure plan for 2025 not just as infrastructure spending, but as a commitment to digital supremacy, where AI and IoT are the new rail spikes.

Full implementation and optimization of Positive Train Control (PTC) across U.S. network.

The core safety technology, Positive Train Control (PTC), is now fully implemented and certified by the Federal Railroad Administration (FRA) across CNI's 35 required U.S. subdivisions, a milestone completed ahead of the December 2020 deadline. This massive safety overlay, designed to prevent accidents from human error like overspeed derailments, represented an investment of approximately CAD 1.4 billion (USD 1 billion) for the installation on roughly 3,100 route-miles.

The focus has now shifted entirely to optimization and refinement, which is the real long-term cost. In July 2025, CNI joined 20 other host railroads in a joint request to amend their PTC Safety Plans to implement onboard software Version 6.5.5.0. This is defintely a necessary step, ensuring interoperability (the ability for other railroads to run on CNI's PTC-equipped track) remains seamless as the technology evolves. You can't just install it and walk away; you have to keep iterating the software.

Significant investment in digitalizing the supply chain to improve network fluidity.

CNI is actively digitalizing its scheduled railroading model, which is a significant opportunity to improve network fluidity and customer experience. The company's multi-year strategic partnership with Google Cloud is the engine here, leveraging artificial intelligence (AI) and machine learning (ML) to move core infrastructure to the cloud.

This initiative is creating an intuitive digital platform that gives customers and supply chain partners real-time visibility into the logistics journey-from planning and shipping to tracking and payment. The total 2025 capital program of C$3.4 billion is largely directed toward strengthening the network's resilience and efficiency, with specific regional investments like the $170 million in Illinois earmarked for track maintenance, the Chicago Logistics Hub, and the enhancement of technology and training facilities.

Here's the quick math on CNI's 2025 capital focus:

Use of predictive maintenance (AI/IoT) to reduce equipment failures and delays.

The use of predictive maintenance, driven by the Internet of Things (IoT) and AI, is a clear competitive advantage for CNI, directly translating to lower operating expenses and a better operating ratio. The company collects over 24 million data points per day from its network of sensors and inspection systems.

This massive data influx powers the predictive analytics that identify potential failures before they cause costly network disruptions. The 2025-2026 Winter Plan specifically highlights the application of these predictive technologies to maintain fluidity during the most challenging months.

• Wayside Detectors: Over 2,800 sensors monitor components like wheels and bearings in real-time.
• Automated Inspection Portals (AIPs): 7 portals use machine vision and AI to assess railcar health at full speed.
• Automated Track Inspection Program (ATIP): 11 specialized railcars use 4th generation technology, including ground-penetrating radar, to assess track and subgrade conditions.

This allows engineers to be directed precisely where they are needed, reducing the risk of a major breakdown. This is smart business.

Cybersecurity threat to operational technology (OT) systems is a growing concern.

As CNI integrates more AI and IoT systems into its core operations, the cybersecurity threat to its operational technology (OT) systems-the systems that control trains, signals, and switches-becomes a paramount risk. The global annual cost of software supply chain attacks to businesses is projected to reach $60 billion in 2025, demonstrating the scale of the threat.

CNI is directly addressing this by establishing a dedicated OT security practice. The company is actively recruiting for roles like Senior Manager OT Security Architecture to define cybersecurity reference architectures and standards for these critical systems. The Canadian operational technology-security market itself is projected to grow from $2.02 million in 2025 to over $15 million by 2035, reflecting the broader industry's recognition of this vulnerability. What this estimate hides is the potential for catastrophic physical damage and supply chain disruption from a successful OT attack. It's a huge vulnerability for all critical infrastructure.

Canadian National Railway Company (CNI) - PESTLE Analysis: Legal factors

Strict adherence to Federal Railroad Administration (FRA) and Transport Canada safety mandates.

You can't operate a railway across North America without regulatory compliance being a core operational risk, and for Canadian National Railway Company (CNI), that means satisfying two major federal bodies: the U.S. Federal Railroad Administration (FRA) and Transport Canada. The cost of maintaining this adherence is significant and non-negotiable.

For the 2025 fiscal year, CNI's capital program includes approximately $3.4 billion CAD in total capital projects, with a substantial portion dedicated to safety and maintenance. Specifically, about $2.9 billion CAD is allocated to maintenance and strategic infrastructure initiatives across both the Canadian and U.S. networks, ensuring the physical integrity of the rail lines. That's a huge number, but it's the price of admission for a Class I railroad.

Still, even with massive investment, penalties occur. In 2025, Transport Canada issued at least two significant Administrative Monetary Penalties (AMPs) against the company for safety violations under the Railway Safety Act and its associated rules, demonstrating continuous regulatory scrutiny.

CNI also has an ongoing obligation to file periodic reports with the FRA for any violation of the U.S. Hours of Service regulation, a key compliance area that directly impacts employee fatigue and operational risk.

Ongoing litigation risk related to derailments, land use, and property disputes.

Litigation is a constant factor in the rail business; it's a cost of doing business, but the amounts can be staggering and unpredictable. The risks arise from major environmental incidents, which can lead to massive fines, and from smaller, localized property disputes that drag on for years.

A recent example of the environmental liability risk is the $8 million fine CNI was ordered to pay on July 22, 2024, after pleading guilty to two charges under the Fisheries Act related to two 2015 derailments in Ontario. These incidents released millions of liters of crude oil, showing that legacy environmental issues can result in significant financial penalties nearly a decade later. The money from that fine is directed to the Government of Canada's Environmental Damages Fund.

Near-term litigation risks include:

• Property Damage Lawsuits: In a British Columbia Supreme Court case in 2025, landowners are claiming repair costs of $255,150, alleging CNI failed to maintain a culvert that caused flooding on their property.
• Regulatory Disputes: CNI is engaged in a Federal Court dispute with VIA Rail (as of early 2025) over the reasonableness of speed reductions CNI imposed on VIA's new trains at 304 grade crossings.
• Land Use/Infrastructure: In June 2025, CNI took legal action against Parks Canada to force the agency to allow it to build a berm in Jasper National Park to protect its main line from potential flood damage, a process the company says has been delayed for eight years.

The company also secured a major legal win in October 2025 at the Federal Court of Appeal, which set aside a 2023 Canadian Transportation Agency (CTA) decision on interswitching rates, compelling the CTA to consider 'commercial market factors' in its rate-setting methodology. This is defintely a win that could impact future revenue potential.

Compliance with evolving data privacy laws for customer and employee information.

The regulatory landscape for data privacy is shifting rapidly in North America, particularly in Canada, which creates a continuous compliance requirement for CNI's vast customer and employee data pool.

CNI's current framework is built around Canada's Personal Information Protection and Electronic Documents Act (PIPEDA), and the company's Privacy Policy was last updated on October 23, 2025. They also have specific internal policies for handling sensitive employee data, including a Biometric Data Privacy Policy for information like iris scans and voiceprints used for safety and time management purposes.

The immediate risk is the patchwork of new provincial laws and the pending federal overhaul:

• Quebec's Law 25: This law significantly strengthens privacy rights and allows the regulator to impose massive fines, up to $10 million or 2% of worldwide revenues, whichever is greater, for non-compliance. CNI must ensure its data handling for Quebec residents meets this higher standard.
• Federal Reform: Bill C-27, which contains the proposed Consumer Privacy Protection Act (CPPA), is moving through the legislative process and will replace PIPEDA, introducing new consumer rights like the ability to request data deletion and portability.

Compliance is a moving target, especially with the introduction of new rights for individuals regarding automated decision-making. That's a huge factor for a company that relies heavily on data analytics for network efficiency.

Labor laws governing collective bargaining agreements in both countries.

Labor law governs CNI's relationship with its unionized workforce, which is central to its operational stability. The legal framework for collective bargaining in Canada is federal, but recent legislative changes have significantly altered the power dynamic.

In February 2025, CNI successfully ratified a new four-year collective agreement with the International Brotherhood of Electric Workers (IBEW), which represents approximately 750 Signals and Communications employees in Canada. This agreement provides for a predictable cost structure, including 3% wage increases annually, and is set to expire on December 31, 2028. Securing a long-term deal like this is crucial for planning.

However, the risk profile for future negotiations with other major unions, such as the Teamsters Canada Rail Conference (TCRC) and Unifor, has increased due to new Canadian federal law:

• Replacement Worker Ban: Amendments to the Canada Labour Code (Bill C-58) came into effect on June 20, 2025, which ban the use of most replacement workers during a strike or lockout.
• Maintenance of Activities: The same amendments require employers and unions to reach an agreement on which activities must be maintained during a work stoppage within 15 days of giving notice to bargain.

The ban on replacement workers fundamentally shifts the leverage in favor of the unions, making the risk of a major, prolonged work stoppage-and the associated economic cost of network shutdown-a much higher probability in upcoming negotiation cycles. This new legal reality forces CNI to approach all future collective bargaining with a much more cautious and concessionary mindset.

Canadian National Railway Company (CNI) - PESTLE Analysis: Environmental factors

Pressure from investors and regulators to meet aggressive carbon emission reduction targets.

The regulatory and investor landscape is defintely pushing Canadian National Railway Company toward a hard decarbonization deadline, shifting the focus from incremental fuel efficiency to absolute emissions reduction. This pressure is quantified by the Science Based Targets initiative (SBTi) validation of Canadian National Railway Company's net-zero goal by 2050.

The near-term targets are the most critical for investor due diligence now. Canadian National Railway Company is committed to a 43% reduction in Scope 1 and 2 greenhouse gas (GHG) emissions intensity by 2030, using a 2019 baseline. To be fair, the company has made measurable progress, achieving 19.7% progress toward this 2030 intensity target as of the latest reporting. This is a heavy lift, but it's a necessary one to maintain access to capital from ESG-focused institutional investors like BlackRock.

The key targets driving CapEx decisions are:

• Achieve net-zero GHG emissions by 2050.
• Reduce Scope 1 & 2 GHG emissions intensity by 43% by 2030 (2019 base year).
• Reduce Scope 3 GHG emissions intensity (from fuel/energy) by 40% per gross ton mile (GTM) by 2030.

Increased capital spending on fleet modernization to transition to lower-emission locomotives.

Canadian National Railway Company's capital spending for 2025 clearly maps to its environmental commitments, focusing on resilience and efficiency. The total capital expenditure program for the 2025 fiscal year is approximately CAD $3.4 billion (or about US $2.43 billion).

A significant portion of this is directed at the rolling stock (locomotives and railcars), which is the core of their emissions problem. Over CAD $500 million is specifically allocated in 2025 to upgrade and expand the rolling stock. While the bulk of this is for fleet renewal and efficiency-driven upgrades like new Tier 4 diesel-electric locomotives, it directly supports the lower-emission transition by retiring older, less efficient units.

Here's the quick math on the 2025 capital allocation:

Climate change impacts, like extreme weather, increase operational disruption and repair costs.

Climate change is no longer a long-term risk; it's a near-term operational cost. Extreme weather events-from frigid cold snaps to wildfires and flooding-force Canadian National Railway Company to operate below capacity, which translates directly to lost revenue and higher costs. For instance, extreme cold (below -25°C) forces the railway to reduce train speeds and shorten train lengths for safety, substantially cutting network capacity.

The company is addressing this with CapEx focused on resilience. The 2025 Winter Plan, for example, is supported by the overall capital program, with approximately $1.5 billion of the total CapEx going toward Western Canada infrastructure, specifically to expand key corridors and add double-tracked sections to enhance capacity and better respond to extreme conditions. They are also investing in specialized equipment; in 2024, Canadian National Railway Company invested over $1 million to overhaul 20 distributed air braking cars (air cars), which are crucial for maintaining longer train lengths and capacity during severe cold. What this estimate hides is the true cost of lost throughput, which can run into the tens of millions of dollars for a prolonged disruption.

Managing fuel efficiency and reducing greenhouse gas emissions remains a top priority.

Fuel efficiency is the most direct lever Canadian National Railway Company has to manage its largest operating expense and its environmental footprint simultaneously. The company's goal is to move more freight with less fuel. Their all-time record fuel efficiency, achieved in 2021, was 0.879 U.S. gallons of locomotive fuel consumed per 1,000 gross tonne miles (GTMs).

This efficiency focus is essential for meeting the Scope 3 target-a 40% reduction in GHG emissions intensity per GTM by 2030. Canadian National Railway Company has already achieved 30.8% progress toward this goal, largely through technologies like Energy Management Systems (EMS) and distributed power functionality on locomotives. This is a strong operational performance, but still, the final push to 40% will require a greater mix of renewable diesel and more capital-intensive fleet replacements.

The core challenge is that while rail is highly efficient compared to trucking, the sheer volume of diesel consumed means even marginal gains require massive investment. The company's strategy is clear: use technology to squeeze every last bit of efficiency out of the existing diesel fleet while simultaneously exploring alternative fuels.