red US Truck with chrome parts
© Ilfede | Dreamstime.com

To secure sufficient capacity for their imports from Mexico moving by truck, US firms are paying for empty trucks heading south of the border.

Cross-border flows are a tale of two countries at this point; trucks going into the US interior are fully loaded while little is headed into Mexico.

US consumers have been clamouring for goods produced south of the border: home appliances, electronics and home improvement items produced in Mexico are particularly in high demand.

And car imports from Mexico are also up, having sprung back to life when US states lifted or loosened lockdown measures, as well as fresh produce, which has enjoyed steady demand in recent months.

This is in stark contrast with southbound flows, which have been hit hard by a slump in demand in Mexico. In its Third Quarter 2020 Logistics Market Update, on 20 August, Dallas-based 3PL Transplace points to the impact of Covid-19 and the slump in the Mexican currency as key factors.

Most of Mexico’s larger cities are still in lockdown, or barely open to commerce, which has resulted in a sharp drop in demand for consumer goods and other imports, says Transplace, and its analysts see no indication that the battered peso could stage a significant recovery.

“We expect the exchange rate to fluctuate between 22 and 23 pesos to the dollar during the remainder of 2020,” they wrote.

The drop in imports is affecting northbound trucking as well as intermodal capacity in Mexico, which is normally generated by import traffic, Transplace noted.

“With the current situation, northbound equipment and capacity is very limited inside Mexico and capacity constraints have expanded to Laredo, San Diego, El Paso and other border crossing points, generating an imbalance limiting available trucks for northbound (moves) and increasing rates.”

It reported that customers were paying for empty truck runs from border crossing points to their manufacturing plants in Mexico in order to secure northbound capacity. And their pain extends to routes from the border to other points in the US interior. Shippers pay 15%-40% higher rates to move their cargo from the border to US destinations, Transplace reported.

According to another report, US demand for imports from Mexico pushed spot truck rates out of Texas up 15% in July, and in recent weeks demand out of Laredo has averaged more than 100 loads per available truck, Transplace found.

Capacity constraints are exacerbated by the fact that Laredo’s crossdocking facilities have been overwhelmed, which has further reduced availability of empty trailers to head into Mexico. Dwell times at saturated warehouses have stretched to four days on average, producing additional warehouse charges.

Transplace’s advice to shippers is grim: “With the current imbalance between shippers ramping up northbound and Mexican importers not bringing equipment into Mexico, we expect capacity in Mexico to continue tightening. It is the time to work on plans to secure capacity and consider paying empty miles to satisfy northbound demand.”

And as with the currency situation, the outlook for economic conditions remains gloomy. GDP is projected to contract by 9.5% this year and the recovery in 2021 is expected to be weak, Transplace warned.

COMMENTS 0


Leave a Reply

    Topics