Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: Mexico trade boomed in May but profit margins are tightening; a Korean auto supplier opens a plant in Mexico; Otay Mesa plans to open a new port by 2024; and Texas trucking company set to build terminal.
Mexico trade boomed in May but profit margins tightening, experts say
Mexico exported $40.8 billion in goods in May, a 125% increase compared to the same period in 2020, when most of the country’s factories were closed due to the pandemic, according to data from the National Institute of Statistics and Geography (INEGI).
Exports of passenger and commercial vehicles, automotive parts and agri-food products helped Mexico register a trade surplus of $339.7 million in May, compared to a $3.5 million deficit during the same month in 2020.
Imports into Mexico rose 87.5% to $40.5 billion for the month, led by intermediate goods, mostly components that the Mexican manufacturing sector acquires for the manufacture of various products, the INEGI reported.
While U.S.-Mexico trade is recovering to pre-pandemic levels, cross-border operators said profit margins are beginning to flatten.
“We’ve done very well in all of our divisions, usually they go hand in hand. If our trucking division is doing well, then more than likely our other divisions are going to do well,” said Gerardo Alanis Barrios, CEO of Cold Chain Solutions in Laredo, Texas.
Alanis Barrios and other members of his family operate a group of companies unofficially called Grupo Alanis in Laredo and just across the border in Nuevo Laredo, Mexico. The companies include transportation, cold storage, drayage, customs and logistics operations.
“The one thing that we have seen lately is numbers go down, not revenue but margins go down in our logistics division, because capacity is very tight and rates have gone up,” Alanis Barrios said.
Grupo Alanis provides door-to-door services through all of its companies across the U.S., Canada and Mexico.
Alanis Barrios said U.S. carriers are charging more, affecting contracted rates they have with customers.
“Before, we would charge the customer for door-to-door service, let’s say from Monterey, Mexico, to California for $5,000. We have $3,000 in the U.S. portion, and before we would pay $2,900 to the U.S. carrier. Now we’re paying $2,950. We went from $100 margin to $50,” Alanis Barrios said.
Spot rates, represented by Truckstop.com’s seven-day average in the chart, for the high volume lane from Laredo, Texas, to Dallas (TSTOPVRPM.LRDDAL), are currently about 22% higher compared to the same period in 2020.
Alanis Barrios said his company’s logistics division has been the most affected by the tighter margins.
“We have steady volume, it’s just our margins are a little lower than they were a few months ago,” Alanis Barrios said. “What has been helping us is that we have carriers that have not increased rates in such a dramatic way, like spot carriers.”
Alanis Barrios said he’s never seen a cross-border market like the current one.
“What worries us — the approach that we’re taking is — is it a bubble? Is it not? Should we get excited? I think we’re not at the point where we think we’re good, that this is going to stay the same for many years,” Alanis Barrios said.
Julio A. Santaella, president of INEGI, recently said Mexico’s trade surplus points to the country’s economic recovery.
“The balance of the country’s international merchandise trade in May 2021 was a surplus of almost $340 million, thus accumulating a positive balance of $333 million in the first five months of the year,” Santealla tweeted Wednesday. “With the recovery of domestic demand, Mexico’s total merchandise imports rose 4.2% month over month in May 2021, thus extending their upward trend, to which imports of intermediate goods have especially contributed.”
Korean auto supplier to open plant in Mexico
Woobo Tech Co. recently announced it will build a $10 million factory in Mexico that will generate 380 jobs, according to news outlet Industrial Cluster.
The facility will be located in the city of Arteaga, about 188 miles south from the U.S.-Mexico border. The company did not say when the factory will open.
The Pyeongtaek, Korea-based company manufactures auto parts such as headrests and door latches.
Otay Mesa to open new port by 2024
Officials from the state of California and Mexico recently signed an agreement to go forward with completing a new port of entry project along the U.S.-Mexico border by late 2024.
The $1 billion binational Otay Mesa East Port of Entry project has been underway since 2013. Once completed, it will be the second gate in Otay Mesa and the third between San Diego County and Mexico.
Otay Mesa is located on the border about 20 miles south of San Diego.
The new port of entry will have five lanes for passenger vehicles and five for commercial trucks, with the option for these to be interchangeable depending on the time and demand, officials said.
The new port of entry could provide an economic boost of $1.8 billion annually to California.
The memorandum of understanding signed last Monday by dignitaries on both sides of the border set key project milestones, identified where toll roads would be set on the U.S. side of the border and established a framework for the countries to develop revenue-sharing policies for the funds.
Texas trucking company set to build terminal
Transcar Express LLC recently received a conditional permit to build and operate a freight truck terminal on 16.65 acres in San Benito, Texas, according to Virtual Builders Exchange.
Brownsville-based Transcar Express, which has a fleet of 105 trucks, currently parks and maintains its fleet in several locations and is reportedly looking to consolidate.
“They have three different locations, one off the expressway in Brownsville, and they are hoping to move to San Benito and make this their headquarters,” Bernard Rodriguez, the city planning and development department director, said at a June 15 city commission meeting.
The project will include a gated entrance, a 5,590-square-foot two-story administration building, a maintenance building/warehouse facility, and a parking terminal for the truck fleet.
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More articles by Noi Mahoney