More than 5 million commercial trucks crossed the U.S.-Mexican border in 2012, a 4.8 percent increase from 2011 that set a new record. Unfortunately, Troy Ryley says, too many tractor-trailers were headed in one direction — north.
The imbalance in north-south truck traffic threatens to create a severe capacity shortage in Mexico as cross-border trade enters its peak season, which now runs roughly from April through July, said Ryley, managing director of Transplace Mexico, a division of Dallas-based third-party logistics company Transplace.
“There’s a lot more export happening today in this market than there is import, and we don’t expect that to slow down,” Ryley told The Journal of Commerce. The imbalance can be as high as one southbound load for every four northbound loads.
That’s making it much more difficult and expensive to source northbound capacity in Mexico, said Ryley and Transplace country director for Mexico Ben Enriquez. The shift of international production to Mexico will make finding trucks even harder.
That poses a challenge for U.S. shippers and motor carriers. Both will have to become more innovative to secure northbound truck and rail capacity from Mexico, and to keep cross-border truck transportation costs from spiking, they said.
“There’s a tremendous amount of increased investment in Mexico in general, and that’s putting additional pressure on an already aggravated situation with northbound capacity,” Ryley said. Rising trade levels will squeeze capacity tighter.
U.S.-Mexico surface transportation trade jumped 10 percent in 2012, with the value of goods transported across the border by tractor-trailer increasing 9.5 percent last year to $323 billion, according to the U.S. Bureau of Transportation Statistics.
Along Mexico’s long border with Texas, that trade gains steam from April through July, when the produce season sucks up available truck capacity. “Everything starts in April,” Ryley said. “We have about three times the workload in peak season.”
Increased foreign investment in Mexico is spurring domestic industrial growth, and that will consume even more capacity, Enriquez said. For example, Bloomberg reports steel manufacturers in Mexico are spending $3 billion on new factories.
“In Mexico City, Guadalajara and Monterrey, it’s always hard to find rail equipment,” Enriquez said. “In trucking, there are 50 to 60 daily (outbound) loads in some markets where they don’t have any inbound loads or only a few shipments.”
As Mexico’s economic engines build steam, the demand for intermodal rail and over-the-road capacity will increase in coming years, but “in order to create capacity in Mexico, you have to have the southbound freight” from the U.S., Enriquez said.
Right now, U.S. motor carriers often send empty trailers into Mexico to meet northbound demand, “and those empty miles are reflected in freight rates,” Ryley said. That can translate into higher freight revenue and profit for U.S. carriers. “It’s a great time for U.S. trucking companies to begin to consider Mexico,” Ryley said. “Mexico tends to be a high margin business for those that do it well.”
For shippers, it’s a good time to consider new ways to control cross-border costs. “Shippers that have southbound freight should leverage that with northbound freight,” Enriquez said. “They need to use different modes, be flexible and be creative. They should make early (shipment) commitments” to secure capacity.