News / Major rail operators set to form new US intermodal freight corridor

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Three major rail operators have struck a deal that will see a new freight corridor link Mexico, Texas and the US south east, as near-shoring drives capacity demand.

The agreement will see newly merged Canadian Pacific Kansas City Southern (CPKC) and CSX acquire and operate portions of Genesee & Wyoming-owned Meridian & Bigbee Railroad (MNBR) for a direct interchange connection in Alabama.

CPKC CEO Keith Creel said: “This new east-west connection takes advantage of each railway’s routes and services and can extend our reach, converting more freight traffic to rail and off highways.”

Running between Meridian in Mississippi and Montgomery in Alabama, MNBR operates under a combination of ownership and operating agreements. Under the deal, CPKC will acquire and operate the segment between Meridian and Myrtlewood, Alabama, while CSX will operate lines currently leased by MNBR east of Myrtlewood, resulting in an interchange between the two at or near Myrtlewood.

The actual terms of the transaction have not been disclosed and portions need regulatory approval from the US Surface Transportation Board.

But CSX said the deal included Genesee’s acquiring of CPKC-owned “Canadian properties and rights”, while MNBR would retain rights to provide local services to its existing customers on its former lines, and connect with other railroads without interchange restrictions.

The deal comes as trade volumes between Mexico and US are on the up. Last year, some $780bn-worth of goods flowed between the two countries, a 17% hike on 2021, while US imports from China have fallen significantly this year, by 26% to May.

Management consultancy Kearney’s annual reshoring index claims that “by the end of 2023, China’s portion of US imports will definitely have dropped below 50%”. This would be the first time in more than a decade following trade segregation that began under President Trump before ramping up under his successor, Joe Biden.

Following pandemic-induced supply chain turmoil, McKinsey & Co found some 70% of apparel and fashion companies were planning to increase their near-shoring by 2025. One forwarder told The Loadstar: “Many companies are looking to change their relationship with Tier 1 suppliers, either in favour of more locally sourced materials or, in some instances, producing key components themselves.

“Although near-shoring has many benefits, it comes at a cost to larger companies that have to relocate, invest in new infrastructure and often higher labour costs compared to offshore models. This inevitably affects the price of goods to the end-user so if this change does come, it will have to be gradual if it is to be accepted.”