Plethora of opportunities for intermodal exists in Mexico

Lawrence J. Gross, president, Gross Transportation Consulting | May 29, 2016 10:00AM EDT

Lawrence J. Gross

One of the key intermodal frontiers in recent years has been Mexico. The Mexican railroads have been investing in their intermodal infrastructure and introducing new services. Many aspects of the cross-border trade would seem to be well-adapted to intermodal, not the least of which is the relatively long distances involved. 

But it’s been difficult to get a clear picture of intermodal activity because of a relative paucity of data. Although the Association of American Railroads and the Bureau of Transportation Statistics have provided some insight, the recent agreement between the two main Mexican rails — Kansas City Southern de Mexico and Ferromex — to begin reporting to the Intermodal Association of North America has enabled a more detailed and nuanced picture of the situation. Here are six key conclusions I’ve made from an initial examination of the data:

• Mexico’s intermodal market is in an early stage of development. Intra-Mexico intermodal traffic accounted for just 2.2 percent of the total North American intermodal market in March. It’s about one-fifth the size of the intra-Canada market.  Cross-border volume between the U.S. and Mexico is about one-third of the volume flowing across the U.S.-Canada border, coming in at about 2.0 percent of total North American volume. In total, about 4.2 percent of all North American intermodal volume involves Mexico.
• Mexico’s domestic market consists mainly of movements of international containers. Some 87 percent of all intra-Mexico (both originating and terminating in the country) revenue movements in March were of ISO containers. Domestic intermodal is in an early stage of development, with less than 4,000 revenue moves of domestic containers during March.
• The cross-border market is all about domestic equipment. Domestic equipment accounted for more than 97 percent of all intermodal revenue movements between the U.S. and Mexico.  With less than 1,000 revenue cross-border movements of ISO containers (including both directions) in March, it seems evident that the Mexican ports have yet to become a substantial alternative route for Texas and South Central inbound cargo. It should be noted, however, that this volume is more than double that of a year ago.
• Recent growth is minimal. Although we don’t have the data to look at long-term trends, and volume has undoubtedly increased, growth has been difficult to come by recently. Intra-Mexico volume in the first quarter of this year was down 4.6 percent from a year earlier, with movements of ISO containers down 6.8 percent. Movements of domestic containers grew a strong 16 percent over the same period, but from a small base. Moves across the U.S.-Mexico border grew by just 1.9 percent over the same period, with moves of domestic equipment up just 0.4 percent. Although domestic growth was about in line with the rest of the North American network, domestic container volumes actually grew at a slower rate than in the U.S., which had more robust domestic container growth offset by losses in trailer-on-flatcar volume. The balance of the cross-border growth was in ISO containers.
• It’s a container world. Over the last 12 months, only 550 trailer-on-flatcar moves have occurred within Mexico vs. 47,000 domestic container movements. Trailers are only slightly more important moving across the border: 7,500 in the last 12 months vs. 316,000 domestic boxes.
• The Midwest dominates the intermodal cross-border trade. Movements between the Midwest region and Mexico accounted for 30 percent of all movements involving Mexico and 71 percent of the cross-border trade. The next most important U.S. region was South Central, which was the originating or terminating point for about 13 percent of all cross-border revenue moves, with other regions accounting for lesser volumes.

The Bureau of Transportation Statistics is another important source of data on the cross-border trade. Based on BTS reports, loaded intermodal units accounted for approximately 11 percent of the loaded truck/intermodal loads crossing the border in 2015. This is less than the roughly 18 percent total intermodal share we have calculated for the U.S., but our market share figure is of long-haul moves only, while the BTS cross-border truck moves includes both short- and long-haul, so the figures aren’t directly comparable.

It does appear that intermodal in Mexico has room to grow. Domestic intermodal within Mexico is in its infancy. Given Mexico’s geography, with its relatively long hauls, there should be opportunities for intermodal to convert more freight off the highway.