New intermodal services connecting the Mexican economy to its partners in the USMCA block, Canada and the U.S. are sprouting, caused by nearshoring and triggered by the marriage of Class I railroads Canadian Pacific and Kansas City Southern on April 14.
The integration of the two rail companies is expected to take three years to complete. However, this hasn’t stopped the newly-minted Canadian Pacific Kansas City (CPKC) from announcing new services and partnerships, taking advantage of being the only Class I carrier whose network spans all three USMCA countries.
On May 11, CPKC started a daily intermodal service that links Chicago with San Luis Potosi in central Mexico via Kansas City, markets in Texas and Monterrey south of the border. The total transit time from Chicago to the Mexican terminus is 98 hours.
According to CPKC, the new offering targets a diverse group of shippers moving a variety of products. Automotive traffic is a major component of rail flows between the US and Mexico.
“The Mexico Midwest Express offers truly best-in-class service and represents the growth potential of providing truck-competitive service and reliable rail transportation options for shippers,” said CPKC president and CEO Keith Creel. “This is a game changer for this essential north-south trade corridor.”
CPKC wasted no time reeling in strong partners for intermodal flows to and from Mexico. Barely a week after the official merger, it announced an alignment with intermodal heavyweight Schneider National. The company, which offers truckload, intermodal and logistics services, was designated as the rail firm’s “strategic intermodal carrier” for the corridor between Chicago and all major points in Mexico.
One week later, CPKC unveiled another intermodal deal. Knight-Swift Transportation signed a multi-year agreement for the new Chicago-San Luis Potosi train. According to Swift Transportation president and CFO Adam Miller, this gives Knight-Swift’s customers new options for their supply chains.
Between those two announcements came the word of a new intermodal service from a coalition that involves rail carriers Union Pacific (UP), Canadian National (CN) and GMXT.
The trio unveiled their Falcon Premium service, which connects all CN points in Canada and Detroit with GMXT’s terminals in Mexico. It brings together GMXT’s service from Mexican points to the Mexico-Texas border, UP’s route from Texas to Chicago and CN’s operations from Chicago into Canada.
With a seamless rail connection in Chicago, the trio claims that this will be the fastest, most reliable intermodal service between Mexico and Canada.
Tracy Robinson, president and CEO of CN, described the new service as a “transformational new product” and a “game changer for intermodal customers.”
Meanwhile, Florida-based ocean carrier Crowley announced a multimodal alternative which mostly serves the Caribbean and Latin America. It plans an end-to-end, integrated ocean and rail service linking Mexico with the U.S. Midwest and Canada.
The new service, scheduled to kick off in September, combines a new Crowley shipping route from the Mexican gulf port of Tuxpan to Mobile, Alabama, where containers are transloaded to CN trains, which serve the US port daily.
Ships, which will operate weekly on the route, will carry 1,000 TEUs plus more than 200 reefer containers.
“With this collaboration with Canadian National, Crowley has further expanded market reach for our customers and the communities they serve with the fast, reliable transport of goods across the entirety of North America,” said Brett Bennett, senior vice president and general manager at Crowley Logistics.
The pair claim that the routing is faster and environmentally friendlier than trucking, avoiding long wait times at the land border between Mexico and the United States.
Cross-border trucking has been going strong, defying the slump that has hit the U.S. trucking industry. The latest report on the trucking market by US Bank shows all regions in the U.S., bar the Southwest, in the doldrums in the first quarter of this year.
Whereas most regions suffered a double-digit year-on-year contraction in volumes, trucking in the southwest was up 14% from a year earlier and 5% higher than in the final quarter of 2022. Cross-border trucking has been a major driver.
Figures from the US Bureau of Transportation Statistics show a 5% year-on-year rise in the number of trucks entering the US at the border crossing at Laredo in March, following a 7.9% increase the previous month.
Unlike truckload rates in most US domestic sectors, northbound rates out of Mexico have been stable, according to logistics firms, citing buoyant demand for capacity, especially for automotive traffic and perishables.
U.S.-based logistics firms are also reaching Mexico or expanding their footprint there. Redwood Logistics announced in April that it would step up its activities in Mexico, pointing at investment flowing into the country from various sectors, such as automotive, pharmaceuticals, food and beverage industries.
Mexico’s exports rose to a new record in March, climbing 3.2% annually to US$53.6 billion. The same month saw the value of US imports from Mexico rise 5.7%, also reaching a monthly high.
The rise in Mexican exports to its northern neighbour has been widely attributed to an influx of investment and manufacturing capacity because of nearshoring, although the effects of this trend are only beginning to show.
One brand that is pouring money into Mexico is Unilever. Earlier this year, it unveiled plans for a manufacturing plant in the state of Nueva Leon. This is going to be part of a US$400 million investment in Mexico that the company is planning for the next three years.
With further growth, logistics firms will likely target this sector with more offerings going forward.
By Ian Putzger
Correspondent | Toronto
