Cover Story
Trucks in the driver ’ s seat
As US trade with Mexico grows , railroads see a chance to challenge the dominance of the Mexican trucking industry — if the railroads ’ intermodal partners can lock in new business and deliver reliable service .
Mexico , which surpassed China last year to become America ’ s top trading partner by dollar value , accounted for $ 798 billion in goods and services in 2023 , according to US Census Bureau data . This growth is expected to continue amid rising geopolitical tensions between the US and China .
“ If you ’ ve never done business there before , there is a bit of a learning curve .”
Trucks carry more than 7 million loads across the US-Mexico border annually , while intermodal rail manages only 300,000 , according to the BTS and the Intermodal Association of North America ( IANA ).
Truckload data , however , does not distinguish between types of freight , grouping finished vehicles , fuel , and standard retail goods together . IANA ’ s data excludes empty rail containers crossing the border , making an official market share number difficult to nail down .
For more than two decades , intermodal ’ s market share
has fluctuated between 10 % and 15 %, but dropped this year into the single digits despite the launch of the Mexico Midwest Express and the Falcon Premium services .
“ Mexico certainly has the length of haul characteristics that should make intermodal economics shine ,” Larry Gross , president of Gross Transportation Consulting and a Journal of Commerce analyst , said . “ But based on the numbers , the current intermodal offerings are lacking in one or more of the basic requirements for competing with truck : cost , service consistency , speed , [ and ] ease of use .”
Overcoming hurdles
A number of things will have to occur for intermodal to exceed the 15 % market share threshold .
One challenge is the cyclical nature of surface transportation . Current trucking rates are low , which reduces or eliminates the cost savings of choosing rail .
To grow share , intermodal providers such as the top three — Hub Group , J . B . Hunt Transport Services , and Schneider National — must commit container capacity to Mexico and invest in personnel and sales staff . To succeed , however , midsized providers including C . H . Robinson , Matson Logistics , STG Logistics and Swift Intermodal will need to grow their existing Mexico franchises , and nonasset brokers who haven ’ t been in Mexico must enter .
“ How I would judge success is how many new customers we ’ ve engaged — our BCO [ beneficial cargo owner ] growth , which is up 30 % from a year ago ,” Pat Linden , UP ’ s assistant vice president of marketing and sales , said on Oct . 2 at the Journal of Commerce Inland Distribution Conference 2024 ( Inland24 ) in Chicago .
12 Journal of Commerce | November 18 , 2024 www . joc . com