Rising US-Mexico trade squeezes Laredo truck capacity

Rising US-Mexico trade squeezes Laredo truck capacity

US Customs agents in Laredo handled more than 2.3 million northbound trucks last year, a 6 percent increase from 2017. Photo credit: Shutterstock.com.

A lack of available capacity is making it more difficult for Mexican exporters to find trucks to bring shipments across the US border. 

Moving freight through the border crossing in Laredo, Texas, may not be as difficult as it was in May, but it is no less complicated. Chaos that month caused by the reassignment of US Customs agents to border patrol duties slowed freight traffic to a snail’s pace, delaying northbound truckloads by as much as a day. Then the threat of US tariffs caused a freight surge in June.

Trade and political tensions have calmed since US Customs and Border Protection (CBP) returned agents to truck lanes, the US lifted tariffs on steel and aluminum, and Mexico agreed to help reduce the number of migrants streaming across the country to the US border. But the inherent problem in Laredo remains how to get 2.3 million trucks a year through 16 truck lanes.

“We use the border crossing somewhere between 800 and 1,000 times a month in Laredo, and we are still learning. You can never say that you know everything,” said Alejandro Ayala Quijano, foreign trade manager for Riisa, a Monterrey, Mexico-based aluminum manufacturer. “It changes a lot. The situation before the tariff was supposed to happen was crazy.”

The biggest issue for Ayala Quijano is securing capacity, which can be very tight in Laredo during the produce season. Riisa’s aluminum is shipped in dry vans, mainly to US beverage and automotive manufacturers. In many cases, the company has to meet a definite delivery date and time, which means it often has to ship on days when traffic congestion is high.

“Capacity gets complicated, especially in the produce season,” he told JOC.com. “We get [rate] pressure from our carriers.” To relieve that pressure and find capacity on specific lanes, the manufacturer is using digital marketplace Fr8Hub. “We can save some money on some specific routes,” he said, as the marketplace builds density in routes to and from the US border.

“We began our relationship with Riisa a year ago,” said Ohad Axelrod, CEO of Laredo-based Fr8Hub, which was founded in 2017. “Many of the Mexican carriers we work with don’t have interchange programs with US carriers. That’s a problem as their cross-border business grows. We’re bridging that gap to build relationships.”

Equipment imbalance at the border

The trade imbalance at the border leads to an equipment imbalance, with northbound loads often outnumbering southbound shipments by a three-to-two or two-to-one ratio. When capacity tightens on the US West Coast or in the Midwest and Southeast, trucks are drawn away from the Mexican border to more lucrative lanes elsewhere, raising the cost of northbound freight.

More and more of the shipper’s cross-border runs are direct deliveries to customers throughout the United States, using Mexican drivers with US visas.

“In the last couple years, more and more Mexican drivers have been getting B-1 visas to drive in the United States,” Ayala Quijano said. “They can’t move domestic US freight, but they can take freight to Chicago and then bring a load back to Mexico.”

That’s a trend he sees continuing. “A driver in Mexico may earn $2,000 or $2,500 a month and they can make double that easily in the US,” he said. “Some drivers are staying there, getting jobs with US companies. They’ll stay for five or six months and come back in winter. At the border it’s a major issue. Drivers are going to the US and not coming back.”

Capacity may be abundant in the US overall, but not on the Mexican border and not within Mexico, Ayala Quijano said. “Truck pricing is increasing in certain areas,” he said. “All the area surrounding Mexico City has become an important hub, and that’s where capacity is getting tight. The other major issue is security. It’s good in some places, but bad in others.”

That makes it tough for Riisa to change ports of entry if Laredo becomes too congested, Ayala Quijano said. “Laredo is the most efficient, fastest, cheapest route, and the capacity there is the largest. It’s hard to change to McAllen, Pharr, or Brownsville. The distances are longer and more expensive. Some routes are not as secure, so we have some route restrictions.”

With the 10 percent US tariff on aluminum gone, and the threat of further tariffs on hold, Riisa plans to increase exports to the United States this summer and autumn. 

“We are finding more opportunity to increase cargo shipments to the US,” Alaya Quijano said. “We think the last half of the year is going to be a good one, better than the first half.”

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy.