Covenant Transport has decided to end all service to the interior of Mexico, citing dropping spot market pricing, increasing detention times and an inability to gain the freight density needed to balance costs.
“After five years servicing the interior of Mexico, Covenant Transport Services will, in coming months, end our Mexico service offering,” said Andy Vanzant, senior vice president of Highway Services at Covenant Transport Services.
“This tough, data-driven decision is rooted in our desire to operate a network that brings value to our employees, our professional drivers and our shareholders,” Vanzant said.
In an email to FreightWaves, Vanzant said, “spot market pricing in and out of Mexico has dropped in the last year, negatively impacting our Mexico lanes.”
Vanzant also stated, “Our drivers experience major delays at the borders, with long transloading and inspection times. These delays have negatively impacted our business and created driver-unfriendly conditions and freight. We have been unable to gain the density needed to balance the gateways to our reefer flagship, not to mention in the interior of Mexico.”
Covenant is the second major U.S. trucking company to end its Mexico service this year. In January, U.S. Xpress Enterprises also exited its U.S.-Mexico cross-border operations.
Celadon Trucking Services, which also operates cross-border shipments, said it has no plans to end service in Mexico.
“Celadon is very committed to Mexico and the cross-border operations,” said Celadon chief executive Paul Svindland.
Matt Silver of Chicago-based digital freight platform Forager said Covenant’s decision to end its service in Mexico will have a “big” impact on truck capacity.
“Covenant is a major player in Mexico, so it will significantly impact both dry and reefer capacity,” Silver said. “We have a large network of carriers at this point for cross-border freight. So when it comes to one carrier leaving, it doesn’t completely wipe out all the capacity, but it impacts everybody and has a chain reaction in the industry.”
Silver said his company’s “goal over the next few months with any of our customers that ship refrigerated or frozen product is going to be to convert them over to a transload model.”
In Laredo, Forager has access to a large refrigerated frozen warehouse which has been approved by the U.S. Department of Agriculture and Customs-Trade Partnership Against Terrorism (C-TPAT) certified.
“One of our goals is to convince shippers to work with us on a more cost-effective solution to help them get their freight across the border – not running into issues with capacity getting tightened by one of your players in the market leaving Mexico,” Silver said.
Chattanooga, Tennessee-based Covenant Transport – founded in 1986 – is one of the largest long-haul trucking companies in the U.S. with nearly 7,000 trailers on the road.
Vanzant said “going forward,” Covenant “will continue to service the gateways at Laredo and El Paso, Texas.”
He also stated, “We have communicated the upcoming cessation of interior services to all our customers in Mexico and all employees, and we are grateful for the many positive relationships we have built in the last five years in this segment of our business.”