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Borderlands: Record-breaking Mexican rail blockade costs $81M

Protesters continue to block critical rail lines operated by Kansas City Southern de Mexico in Michoacán state. (Photo: Jim Allen/FreightWaves)

Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: Record-breaking Mexican blockade costs $81M; A&R Logistics expands in Houston; Mexican export bank seals $600M loan; and TA Services acquires Top Gun Freight.

Record-breaking Mexican rail blockade costs $81 million

Rail lines from Mexico’s Port of Lázaro Cárdenas have been blocked for almost 40 days, upending freight flows across several key trade routes.

Lázaro Cárdenas’ trade has been affected significantly by a teacher and student protest in Michoacán state that began Oct. 2. 

The protesters are blocking rail lines operated by Kansas City Southern de Mexico that connect to central and northern Mexico, as well as lines into the United States.

“It has really been a record-setting year for rail blockades across Mexico,” said Corey Brincks, a risk intelligence analyst at Resilience360. “What we found in our reporting related to the specific blockade that’s taking place right now in Michoacán is that the CEO of Ford’s Mexico unit, Hector Perez, was pleading with the Mexican government just three weeks ago for them to really focus on addressing the blockade activity.”

The Port of Lázaro Cárdenas is the largest Mexican seaport and one of the largest seaports along the Pacific Coast, with an annual traffic capacity of around 25 million tons of cargo and 2,200,000 twenty-foot equivalent units (TEUs), according to the Mexican government.

Brincks said traditionally about 60% of the traffic moving in and out of the Port of Lázaro Cárdenas is truck traffic. 

“Because of the rail blockade, they’ve converted that and it’s to my understanding, they’re now running at 100% inbound and outbound with trucks,” Brincks said. “The most severe disruptions at the port were in the initial couple of weeks. Now they’ve been able to source that capacity, I think things have improved as far as moving freight; now the real impact is cost.”

Based on the 37-day rail blockade, the equivalent of 240 trains, 28,800 rail cars and 2.8 million tons of freight has been disrupted, according to the  Mexican Association of Railways (AMF).

Data from Resilience360 shows that just after 20 days the protest had already disrupted the movement of over 4,858 shipping containers and operations at the Port of Lázaro Cárdenas.

“Of the disrupted shipping containers, 2,396 are understood to be stranded at the port, with 1,036 pending loading, 819 canceled or switched to an alternative mode, and 607 loaded without train assignment. Additionally, 1,215 finished vehicles that are stranded have been loaded onto a train, while another 434 are pending loading,” according to a Resilience360 report.

Resilience360 is a supply chain risk management software platform that helps businesses predict, assess and mitigate the risk of supply chain disruptions. 

The protesters are affiliated with the National Coordinator of Education Workers union (CNTE). They are seeking payment of salaries for 1,200 teachers and lagging benefits for new teachers. 

Cross-border operators said the rail blockade in Michoacán has tightened freight capacity even more along the Texas-Mexico border.

“The Port of Lázaro Cárdenas, that’s the only deepwater port that we have in Mexico,” said Frederick Ottosen, general sales manager for Mexico at The ILS Co.

Ottosen added, “There’s been demonstrators shutting down the rails; the last one started Oct. 2 and shut it down completely. So there’s a high demand for bulk transportation, and there’s not enough trucks in Mexico, particularly in our case, we’re moving flour from Lázaro Cárdenas into Mexico City, and it’s a struggle.”

Troy Ryley, president of Redwood Mexico, a division of Redwood Logistics, added some shippers “were able to switch from rail to truck, but capacity is tight due to high demand.” 

On Oct. 23, the Association of Industrialists of the State of Michoacán (AIEMAC) estimated that the rail blockade had caused total losses of $43 million, and around $2.4 every day it continues. As of Sunday, the total losses are at $81.4 million.

Brincks said supply chain managers who depend on rail transportation should prepare contingency plans in case the blockades continue indefinitely. Brincks also advised using risk-monitoring tools to keep track of cargo.

A&R Logistics adds export packaging facility in Houston area

A&R Logistics Inc. is expanding its export services footprint with the opening of a new facility in the Ameriport Industrial Park in Baytown, Texas. 

A&R currently operates three facilities in the same industrial park totaling 800,000 square feet. A&R is purchasing select operating assets and assuming the lease formerly held by Baytown Packhouse. The expansion marks A&R’s fifth facility opening in the past 10 months.

“Demand from our customers for export services has grown considerably over the past few years. Our growth in Houston represents yet another example of A&R investing in solutions to better meet customer needs,” said A&R CEO Mark Holden in a release. 

With the new facility, A&R now operates six export packaging facilities with 13 packaging lines, 3.6 million square feet of export warehousing space and the capacity to package over 3,000 rail cars per month. The export expansion includes A&R’s domestic warehousing footprint of over 2.5 million square feet, with 2,000 rail car storage spots.

Baytown is around 25 miles from downtown Houston, along the Gulf of Mexico.

TA Services acquires assets of Top Gun Freight

TA Services recently completed the acquisition of certain assets of Top Gun Freight Inc., a freight brokerage business located in Carmel, Indiana.

Financial terms of the deal were not disclosed.

As part of the acquisition, Thomas Hosack, owner and president of Top Gun Freight, will join TA Services as vice president of business development.

“Tommy’s expertise in flatbed, truckload, expedited, air and less-than-truckload (LTL) transportation will be invaluable for TA Services, especially as he continues to develop solutions for our existing and future clients,” Scott Schell, CEO and president of TA Services, said in a release.

Mansfield, Texas-based TA Services Inc. is a licensed and bonded freight shipping and trucking company. Mansfield is located just south of the Dallas-Fort Worth Metroplex.

The acquisition of Top Gun Freight builds on other recent developments in TA Services’ business, including its merger with Sellers Logistics in February and its acquisition of assets of Celadon Logistics in April 2019.

Mexican export bank seals $600M credit loan

Bancomext, a state-owned bank and export credit agency in Mexico, has obtained a $600 million credit facility from a syndicate of international banks that will support cross-border export activities.

“The facility will support the [Bancomext] funding strategy amid a sharp contraction in export revenues, which account for nearly 40% of Mexico’s GDP,” Alvaro Mestre, chair of the Mexico desk at Squire Patton Boggs, said in news outlet Global Trade Review.

A credit facility is a type of loan made in a business or corporate finance context.

Cleveland-based Squire Batton Boggs is an international law firm that represented Bancomext in the transaction.

Mestre added, “It will also provide working capital to companies across key exporting sectors of the Mexican economy, including the automotive, aeronautic, transport and logistics, tourism, manufacturing, construction and agriculture industries.”

London-based law firm Norton Rose Fulbright represented Banco Santander, Citibank and Commerzbank, the three banks that took part in the syndicate.

The facility is guaranteed by the Multilateral Investment Guarantee Agency, a member of the World Bank Group.

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Noi Mahoney

Noi Mahoney is a Texas-based journalist who covers cross-border trade, logistics and supply chains for FreightWaves. He graduated from the University of Texas at Austin with a degree in English in 1998. Mahoney has more than 20 years experience as a journalist, working for newspapers in Florida, Maryland and Texas. Contact [email protected]