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The Mexican sourcing market has become increasingly important to North American importers amid the rising threat of tariffs on goods from China .
That ’ s been a boon to North American Class I railroads , who have seen intermodal volumes from Mexico jump 71 % over the last five years . Yet despite new services and investments , the railroads haven ’ t been able to meaningfully increase their share of surface cross-border trade compared with trucking .
Railroads cannot manage to exceed 15 % of the total market and even fell below 10 % this year , according to the US Bureau of Transportation Statistics ( BTS ), because of a slowdown in auto shipments .
Still , there are reasons for intermodal providers to be optimistic about cracking the market share ceiling . The top three intermodal providers in the US — Hub Group , J . B . Hunt Transport Services and Schneider National — are devoting considerable resources in Mexico , and Union Pacific ( UP ) Railroad is working with non-asset brokers to serve Mexico . The focus on assets and staffing in Mexico that asset and non-asset providers are contributing shows there is optimism about growth opportunities .
“ Current intermodal offerings are lacking in one or more of the basic requirements for competing with truck .”
GUILLERMO ARIAS / AFP via Getty Images )
In addition , as more shippers open factories near Mexico City , San Luis Potosi and Silao , the lengths of haul will save money for shippers and reduce greenhouse gas ( GHG ) emissions . The longer the length of haul , the wider the spread between trucking and intermodal in delivering higher cost savings to the shipper . Longer lengths of haul also produce GHG savings since trains are more fuelefficient than trucks in moving large amounts of freight .
The longer the transit , the larger the benefits . From Monterrey , the border is about three hours via truck . From San Luis Potosi , it is eight hours . From Silao , it ’ s about 10 hours , and from Mexico City , it ’ s 12 hours . Thus , as more shippers open in Mexico City , San Luis Potosí and Silao , the better the case for intermodal providers to show why rail is worth considering .
Yet there are many challenges under the current iteration of cross-border service . Train service has been reliable , but customs clearance process has been problematic at times , and it can be challenging to understand Mexico ’ s rules and regulations .
Further , current growth is occurring primarily in Monterrey , where truck capacity is easier to find because the haul to Laredo can be made in a single day . It ’ s harder to find trucks to make eight-to-12-hour , multi-day long-hauls . www . joc . com November 18 , 2024 | Journal of Commerce 11