Mexican ports unlikely to win big from West Coast rerouting

Courtesy JOC.com

Mark Szakonyi, Associate Managing Editor | Mar 05, 2015 3:06PM EST

Mexican port blog photo

LONG BEACH, California — Despite ongoing congestion at the Los Angeles-Long Beach port complex, don’t expect Mexican ports to become major gateways for U.S.-bound cargo anytime soon, Transplace CEO Thomas Sanderson said Tuesday.

Container volume growth at Mexican ports has grown at twice the pace of their North American counterparts since 2000, because of strong manufacturing activity fueled by strong NAFTA demand and lower labor costs than China, and broader economic growth, Sanderson said at the 15th annual TPM Conference in Long Beach, California. Transplace, a third-party logistics provider, has a heavy Mexican presence.

But Mexican ports still can’t compete for the majority of U.S.-bound cargo because their geography equates to longer sailing times and inland transits to the U.S interior, with shippers having to pay more for the latter than if they shipped via U.S. ports.  Mexico’s ports of Lazaro Cardenas, Ensenada and Manzanillo for years have been bandied about as alternatives gateways for U.S. shippers, but they have failed to attract significant traffic bound for north of border despite robust terminal and rail investments.

Unlike western Canada’s Port Metro Vancouver and the Port of Prince Rupert, which have grabbed U.S.-bound cargo in recent years, Mexican ports have geographic disadvantages when it comes to sailings times from Asia. It’s a roughly four to five days longer sailing from Shanghai to Lazaro Cardenas than from Shanghai to Los Angeles and Long Beach, the largest load center in the Americas, Sanderson said.

Mexican port blog graphic

That’s partly because the distance from Shanghai to Lazaro Cardenas, the port best positioned for U.S.-bound imports, is 12 percent farther from the top Chinese port than the ports of Los Angeles and Long Beach are, but also because the Southern California ports enjoy more first calls on sailing rotations, he said. The distance from Lazaro Cardenas to Chicago is also more than 200 miles longer than via Los Angeles-Long Beach, resulting in longer transit times and higher rates, Sanderson said.

But longer intermodal rail routes aren’t the only reason Lazaro Cardenas won’t likely take a significant portion of cargo away from U.S. West Coast ports in the short term. Intermodal rail service to the U.S. heartland from Lazaro Cardenas isn’t as good as BNSF Railway and Union Pacific Railroad’s connections to the Midwest, Sanderson said. Kansas City Southern Railway’s cross-border network serves the south-central port.

There is a lack of double-track on the Mexican route, slowing down intermodal train speeds, because trains can’t be run in opposing directions without having one of the services parked at a siding to allow the other to pass, Sanderson said. Aside from it not being easy to move a container in-bond from Mexico to the U.S, there are also security issues on the route, he said.

“You can easily go on YouTube and find a video of people climbing on top of trains and cutting through containers, and tossing things out to vehicles to the side,” Sanderson said.

However, he didn’t rule out that the Mexican government could help improve intermodal rail and eventually make Lazaro Cardenas a contender for U.S.-bound imports.

Back in October, Kansas City Southern Railway told JOC.com that it was talking to ocean carriers and beneficial cargo owners about potentially diverting shipments bound for the U.S. Gulf region away from congested Los Angeles-Long Beach. But as of now, KCS said “no significant U.S. have imports have” been shifted to the route from Lazaro Cardenas to the Houston market. KCS spokesman Doniele Carlson said the railroad continues to talk to carriers and customers about the option.

“KCS has made a number of significant investments, e.g. at the Port of Lazaro Cardenas, our intermodal facilities, with customs procedures at the border, and throughout our network in anticipation of growth and future demands of our customers,” she said in a statement Thursday. “These investments position KCS well to be a good service provider to those who are choosing an alternate route to West Coast congestion.”

A recent JOC.com survey of shippers also suggests that U.S. shippers aren’t rushing to use Mexican ports as alternative gateways. Less than 1 percent of shippers that said they would shift cargo away from U.S. West Coast ports this year and in 2016 said Mexican ports would be the primary benefactors.

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