Check Call: The effects of nearshoring in Mexico

Future of Supply Chain is right around the corner in Atlanta. Registration is still open, and in a surprise to everyone, the exclusive Check Call discount code was extended to the end of this week. May 24 is the last day to buy tickets using the promo code CheckCallFSC24. As of next week, tickets are back to regular price, so grab the deal while you can. 

2024 is undoubtedly the year of nearshoring and of just about everyone investing in manufacturing in Mexico. Mexico is seeing record growth in the warehousing, manufacturing and industrial space. Many companies that had said they were coming to Mexico over the past few years are now setting up shop and establishing operations.

An article by FreightWaves’ Noi Mahoney says, “According to Mexico’s secretary of the economy (SE), there were 378 foreign direct investment (FDI) announcements last year, totaling over $6.4 billion. Private-sector businesses from the U.S. were the top investors in Mexico, accounting for 38% of FDI. China was ranked second at 12%, followed by Denmark (9%), Australia (7%) and South Korea (6%). Mexico hit a new record for FDI in the first quarter of 2024, increasing 9% year over year to $20.3 billion, according to SE.”

Mexico has been the top trading partner with the U.S. every month thus far this year. As these businesses get operations up and running, volumes of cross-border freight will drastically increase.

“Historically, Mexico did not have driver shortages, but three or four years ago, the shortage started and was even more pronounced because many of the domestic Mexico drivers started to get their B-1 visa permits,” Ben Enriquez, Uber Freight’s head of Mexico logistics and customs, told FreightWaves. “They started driving for B-1 carriers, and the B-1 carriers started ramping up operations at U.S.-Mexico border crossing points. Many of the drivers that were driving in from Mexico are now driving for U.S. companies.”

A report from the International Road Transport Union has said there are potentially 56,000 unfilled driver positions in Mexico, and the increase in demand could exacerbate that shortage.

The answer is seemingly becoming long-term contracts and working closely with shippers to achieve goals and metrics.

TRAC Tuesday. This week’s lane goes out West for a 516-mile trip from Salt Lake City to Denver. The all-in rate for this lane has stabilized after shooting up over the past week. All-in before margin, this load should come in around $1,269 or $2.46 per mile. Outbound tender rejections increased from 1.27% on May 14 to 2.19% on Tuesday. A jump like that normally would put some life into spot rates, but when it’s going from 1% to 2%, it’s not enough to affect the market in a significant way. Also not helping spot rates on this lane is the OTRI in Salt Lake. It’s gone from 1.08% to 1.44% in the same period.

On a side note, brokers and shippers can expect fantastic carrier compliance in these markets as nearly every load that is tendered gets accepted.

Who’s with whom? In the continuing saga of the bridge collapse heard round the world, significant progress has been made. The Port of Baltimore reopened in late April to only limited traffic because of the debris and wreckage in the harbor. Now, basically the ships that were trapped in the harbor as a result of the crash have finally been able to leave and others are coming in to deliver goods like nothing happened.

Fast forward to now and the Dali has been hauled out of the harbor back to shore. The ship is being moved to a small terminal to get some temporary repairs before going to a larger shipyard for the massive repairs. Currently, 21 crew members are still on board the vessel.

Now that the ship has been removed, crews can collect the rest of the wreckage and more ships can return to the Port of Baltimore, which is the busiest U.S. port for automotive shipments. As for the bridge, well it looks like that won’t be done for a few years, continuing to negatively affect drivers who had crossed over the water.

The more you know 

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Relocalize aims to eliminate middle-mile logistics with microfactories

Historic trucking rate disparity could cripple service in late ’24 

UTi Worldwide to cut several senior positions

Forward Air hires former YRC restructuring architect Jamie Pierson as interim CFO