Shippers are increasingly turning to railroads instead of trucks to tap the booming surface trade between the U.S. and its closest neighbors.
Improved cross-border rail networks from the U.S. into Canada and Mexico, along with rising trucking costs, have helped spur the shift. A 6.2 percent year-over-year boost in the value of cross-border trade in March pushed even more freight to the railroads, according to the Bureau of Transportation Statistics. U.S. cross-border surface trade, which includes pipeline volume, hit a monthly record of $87.7 billion that month; the value of trade was 76 percent higher than 10 years ago.
The value of goods transported over the U.S.-Mexico border via rail in March rose 16 percent year-over-year, outpacing the 11.2 percent rise in shipments hauled by trucks. The rail growth in relation to truck expansion was even stronger on the U.S.-Canada border. Rail shipments by value increased 8.6 percent year-over-year, while truck growth measured by value of goods inched up 1 percent in the same period.
Motor vehicles, which are normally shipped via train, were the largest commodity transported over the U.S.-Mexico border, suggesting the bustling Mexican auto production sector is driving the growth. The growth in vehicle shipments to the north and auto part traffic going both ways has spurred Kansas City Southern de Mexico and Ferromex to invest billions of dollars in their networks in recent years. That investment by the two major Mexican railroads has attracted other shippers to place more loads on the rails, particularly as truck capacity tightens.
Increased trucking across the U.S.-Canada border helped push the Canadian spot market up 19 percent year-over-year in April, according to TransCore, a load-matching company. Spot prices could rise even higher as Canadian Pacific Railway grapples with a week’s worth of shipments backlogged by the recent strike.
Surges in freight also push up spot trucking rates, nudging some shippers to put more loads on the railroads, said Bob Costello, American Trucking Associations economist. That appears to have happened between February and March, as the value of cross-border trade rose 9.8 percent. Costello said the overall shift in freight and trucks also tends to occur when diesel prices rise or fall dramatically. Although diesel prices have fallen more than 15 cents since early March, the increased volatility of prices, more than price itself, is driving the shift to intermodal rail transport.
Despite the rail growth, truck transport by value dominates the cross-border lanes. Truck carriers haul more than three times as much as railroads on the border to the north and five times as much across the southern border. Imports of raw materials from Canada via rail might also explain the gap between transportation modes.
Cross-border volume imported from Canada and Mexico jumped 36 percent in 2011 from 2006, compared with an 8 percent increase in inbound truck shipments to the U.S. over the two borders in the same period. More expedient cross-border cargo screening on both borders should keep the momentum rolling, with rail taking an even larger share of the loads.