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Today’s Pickup: a resolution for Mexico-US auto trade?

 Kansas City Southern de Mexico railroad locomotive parked in Forth Worth, Texas on May 11, 2017. ( Photo: Paul Brady / Shutterstock )
Kansas City Southern de Mexico railroad locomotive parked in Forth Worth, Texas on May 11, 2017. ( Photo: Paul Brady / Shutterstock )

Good day,

Transpacific container rates keep gaining momentum—the Freightos Baltic indices surged again this week after reports that cargo was being rolled on those services. The major ocean alliances have cut capacity from transpacific lanes in an attempt to restore pricing power, and now many vessels are running completely full. Still, Chicago is one of the only major freight markets in the country showing signs of life. While Chicago’s outbound turndowns are still moving sideways, each subsequent bottom is higher than the previous, indicating bullish momentum for that market and trucking demand. 

Did you know?

UPS plans to add 3D printing to its Field Stocking Locations in Singapore, Germany, England, and Dubai by the end of 2019.

Quotable:

“We went from a very different approach, one without custodial control, without a lot of tracing, tracking, innovation, one where speed was not necessarily the order of the day. It was pretty manual at that point. Now it’s highly automated. But in the old days, you had no package traceability or certainty of delivery.”

-Michael Ducker, outgoing CEO of FedEx Freight, on the progress the company made during his career

In other news:

What Amazon did this week

Warehouse workers are tweeting about labor conditions; Amazon will start showing ads to Prime members on September 14; more physical stores in Chicago; Amazon banned books about 3D-printed guns. (Forbes)

U.S.-Mexico NAFTA deal may come Monday, creating opening for Canada

The U.S. and Mexico are close to resolving their NAFTA differences and may wrap up as soon as Monday, creating an opening for Canada to rejoin talks between countries that trade more than a trillion dollars annually. (Bloomberg)

Lloyd’s of London reviews marine insurance market as losses mount

Lloyd’s of London Ltd., a syndicate that controls about a fifth of the global marine insurance market, is reviewing a number of loss-making members of its marine unit, a move that could drive up costs for insuring the world’s ocean carriers. (Wall Street Journal)

The fate of much-needed new Mexico City airport hangs in the air

The fate of the new airport for Mexico City is in the hands of the populace, after president-elect Andrés Manuel López Obrador announced a vote would be held in October to determine whether or not to proceed with the project. (The LoadStar)

Tanker market could face added pressure from US-China trade spat

As if tanker owners didn’t have enough on their plate already, the US-China trade war is actively damaging one of the most lucrative tanker trades. (Hellenic Shipping News)

Final Thoughts:

The United States and Mexico are reportedly hours away from resolving bilateral issues affecting a reauthorization of the North American Free Trade Agreement, which would open the door for Canada to resume negotiations with the U.S. Talks have focused so far on the automotive industry. Mexico’s share of the North American auto industry is growing rapidly as new plants are being built, and the Trump administration wants to raise the regional automotive content threshold for tariff-free access to about 75% from 62.5%. 

The White House is also seeking to limit the number of Mexican-built cars that can be imported into the United States at a zero or 2.5% tariff; one of the transportation companies most exposed to those limits is the Kansas City Southern, which hauls more autos as a percentage of total carloads than any other railroad. On a consolidated basis, autos make up 7.3% of KSU’s carloads, but on the Mexican side of the network, KCSM’s traffic is 13.1% autos.

Hammer down everyone!

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John Paul Hampstead, Associate Editor

John Paul writes about current events and economics, especially politics, finance, and commodities, and holds a Ph.D. in English literature from the University of Michigan. In previous lives John Paul studied Shakespeare in London and Buddhism in India, but now he focuses on transportation and logistics in the heart of Freight Alley--Chattanooga. He spends his free time with his wife and daughter herding cats, collecting books, and walking alongside the Tennessee River.
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