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UPDATE 2-Canada's CN Rail on hiring spree as shipments surge

(Adds comment from grain group, analysts, union, CP spokesman)

WINNIPEG, Manitoba/MONTREAL, Nov 17 (Reuters) - Canadian National Railway Co plans to extend a major hiring spree into next year as Canada's biggest freight railroad scrambles to handle surging shipments and fill vacancies, a company official said on Friday.

The hiring blitz, which has added 3,500 workers through this year and calls for at least 2,000 more in 2018, follows significant job cuts in 2015 and 2016 and reflects a resurgent economy and stiffer competition from Canadian Pacific Railway Ltd.

The 5,500 new hires in Canada and the United States would represent nearly one-quarter of CN's workforce, and include roughly 1,700 new positions.

Much of the hiring focuses on western Canada, where business is brisk hauling bumper crops and intermodal containers to port, Doug Ryhorchuk, a CN vice president of operations, said in an interview.

He said CN's freight business had been increasing "right across the board," however.

CN has also seen a surge this year in the volume of sand being shipped for use in fracking shale rock to produce oil and gas. CN's network runs through Wisconsin where high-quality sand supplies are located.

Grain exporters are waiting to assess CN's changes, as its service this autumn has been poor, said Wade Sobkowich, executive director of the Western Grain Elevator Association, whose members include Cargill Inc and Richardson International.

Canadian Pacific's grain-shipping service, meanwhile, has improved, he said.

In an RBC shipper survey this week, CN fell three spots in an annual ranking of service.

CN has been a victim of its own success in growing its business to the point of straining capacity, said Edward Jones analyst Dan Sherman.

Ray Donegan, general chairperson of the Teamsters Canada Rail Conference, a union for some CN workers, said the company's training facility is packed with hires that take up to six months to train.

"It's been non-stop for the better part of this year," he said.

At times CN has found it difficult to staff trains, Donegan added.

CN is stepping up hiring as CP sees its own pickup in shipments and makes greater efforts to win customers.

CP plans to hire for new positions only if additions are justified by customer needs and potential revenue growth, spokesman Martin Cej said. It hired or rehired 1,100 people this year to offset regular attrition, he said. (Reporting by Rod Nickel in Winnipeg, Manitoba and Allison Lampert in Montreal; editing by James Dalgleish and Tom Brown)