Important Topics Facing Mexico Today: Part 2 – Transportation and Logistics
By Troy Ryley, Managing Director, Mexico, Transplace
Part two of this series discusses how some important Mexican economic topics are impacting the transportation and logistics industry, and how they’re directly affecting companies doing business there today. Here’s what’s going in the current market, how it’s going to affect both shippers and carriers alike and what to expect in the coming years:
Equipment is Unbalanced…
Probably one of the biggest issues impacting companies doing business in Mexico today is the imbalance of equipment, and there are a number of factors contributing to this ongoing problem:
- Driver shortage. U.S. trucking companies are struggling to find drivers, and most of those fleets are also operating in Mexico. The constant and high demand from U.S. markets is causing less equipment to come into the Mexican market. The recent driver shortage has been particularly difficult because the market is seeing a different generation of long-haul trucking: fewer drivers are willing to spend multiple weeks on the road and most are pursuing more regional opportunities.
- Agricultural season. The natural agricultural season, impacted by the droughts in California this past year, has created a longer and more demanding agricultural northbound market to the U.S. – which takes away from existing equipment supplies for manufacturers. This has been an ongoing issue, and we’re often seeing the issue running as long as April until July.
- Freight moving directly to Mexico. Companies manufacturing in Mexico used to bring their cargo first through the U.S. and then import it cross-border into Mexico from U.S. distribution centers. Now because volume and velocity have significantly increased for many companies, it’s becoming feasible to bring in freight from Europe or Asia directly into Mexico through ocean ports, which decreases the amount of southbound flow and equipment capacity coming directly into the Mexican marketplace.
There aren’t any short-term solutions to this ongoing balance problem, and it will continue to impact a great deal of companies doing business in Mexico. These companies need to plan accordingly.
…And Capacity Issues Continue
The capacity issues in 2015 are going to be extreme, and there will be limited capacity in Mexico from early April through late July. In major cities such as Guadalajara and Monterrey, the capacity imbalance could get as bad as four or five northbound trailers required to every one southbound trailer actually coming into the country. Peak season is running longer, there are severe equipment shortages in major markets, and this situation is projected to get worse.
In response to these issues, truckers are raising prices – focusing on clients that are efficient with their equipment. If a company is holding onto equipment, it’s less attractive as a client to truckers and they will most likely see higher pricing or less available equipment as a result. Spot rates are increasing dramatically during the peak season, so if a company doesn’t have carrier or rate commitments, it could become more costly.
…But Intermodal Might Provide Some Relief
Intermodal transportation is growing tremendously, and the already vast intermodal networks continue to expand. Because of this intermodal boom, there’s a huge amount of investment happening in cross-border business. Many asset-based carriers are increasing their yards and the amount of warehousing and distribution facilities they have in places like Laredo. No one is expecting cross-border traffic to slow down in the immediate future.
At Transplace, we’re seeing a lot of our customers choose to utilize intermodal as a way to try to combat the ongoing equipment imbalance. It’s definitely worth considering as you’re looking at your strategy for shipping in and out of Mexico.
Are you considering using intermodal in your transportation strategy?