Even though the ocean peak season for Mexico will be more subdued compared with a brisker than usual spring, Maersk Line warns trucking capacity challenges that are pushing up rates won’t go away, forcing some shippers to switch cargo to the rail and shortsea services.
The largest global container line, in its ‘Mexico Trade Report’ for the second quarter, said a weaker Mexican peso and inventory stocking helped swell trade in the first quarter, as did the decision by some shippers and manufacturers to move cargo earlier than usual. That stemmed in part from a desire to get ahead of the uncertainty — and possible strengthening of the peso — that potentially could result from the country’s election on July 1 and talks with the United States over the North American Free Trade Agreement, said Mario Veraldo, managing director for Maersk Line Mexico and Middle America.
The report said that “a strengthening peso, the end to a build-up in retailer inventories and growing pressure on trucking capacity as well as rising highway robberies are already taking the shine off Mexico’s trade performance in the second half of 2018 following a strong second quarter.”
Mexico — in container volume uptrend
Cargo volumes through Mexican ports increased by 7.2 percent in the first seven months of 2018, to 2.6 million loaded TEU, including a 7 percent increase in exports and a 7.4 percent increase in imports, according to according to the Mexican Secretariat of Communications and Transportation. The Maersk report stated that a 14.6 percent decline in the value of the peso in the second quarter increased the competitiveness of exports, especially low priced goods such as fruits and nuts, which saw a 35 percent increase in sales to Asia.
An ocean shipping slowdown could potentially make it easier for shippers to find trucking services. But other factors — among them new rules requiring double-tractor trailers to be registered and limiting driver hours of service (HOS) — likely will make it more difficult even if demand diminishes in the coming weeks. Rules in the United States that required digital documentation of HOS have resulted in a capacity shortage and rate increases.
Veraldo said that “it is very evident from the conversations that we have with customers that the peak is not going to be as prominent,” as in the past. But he added that the cargo volume handled in the entire peak season is expected to make it a “very healthy peak season.”
The elevated peak-season demand is expected to place additional stress on Mexican trucking capacity, which has already been stretched tight by a series of factors. The most recent was a new set of rules that took effect on Aug. 27 limiting truck drivers’ HOS, designed to improve road safety. The rules added to the pressure on the sector from a driver shortage, growing cargo volumes, and the introduction of a separate set of rules in June that required double-tractor trailers to be registered with the Mexican government — a task that some truckers say is expensive and burdensome.
The HOS rules require truck drivers to take a 30-minute break every five hours and limit drivers to no more than 14 hours behind the wheel at a time, after which they must take an eight-hour break. Truckers must document their driving time with a paper logbook, which allows for a slightly less rigid interpretation of their driving time than the electronic logging device (ELD) logbook required by the United States since December.
Although the US HOS laws had been place for a while, the US's ELD law triggered double-digit, year-over-year increases in spot and contract trucking rates, along with widespread concern about a chronic driver shortage, with trucking companies refusing work because they have plenty already.
Rules likely to slow cargo
Mexican truckers and business leaders say the country doesn’t have enough rest areas to enable drivers to stop and take the required rest periods, especially given the prevalence of attacks on trucks and cargo thefts. Last month, the Confederation of Industrial Chambers, which represents more than 120 chambers around Mexico, said the government should suspend the HOS rules until it can ensure there are enough rest stops with the necessary security, space, and quality driver services.
Spurred on by the uncertainty of the rules’ impact, Maersk advised its customers in the period before the rules took effect that they might experience delays as a result, Veraldo said. The carrier also extended the time that shippers have to pick up an import box from two days to three days, to give more time in case they had difficulty securing a trucker to move a box. In Mexico, about half the cargo handled by Maersk is moved under carrier haulage, in which it is the carrier’s responsibility to provide trucking services, and the other half goes by merchant haulage, in which the shipper is responsible.
The Mexican government needs to take care that that the country’s trucking fleet size “doesn’t become a bottleneck,” Veraldo said.
“Obviously, you see a decrease in supply, and we already see a movement in that direction here,” said Veraldo, attributing it to both of the new sets of rules. “This will naturally cause a reduction in supply and this needs to be looked into from [the perspective of] how does the industry, the truck industry, address that reduction in supply?”
He said it is still unclear how the rules will impact the ability of shippers to secure trucking services and how it will play out in the future.
“We are still assessing the situation in the different ports,” he said. Some shippers have tried switching from sending cargo by trucks to by train, said Veraldo, predicting that as trucking rates increase the gap between trucking rates and the lower-priced train transportation will widen.