May 21, 2023

Borderlands: Uber Freight report says cross-border trucking showing continued resilience


Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: An Uber Freight report says cross-border trucking is showing continued resilience; a 3PL secures $100 million to expand its network of cross-border warehouses; a pepper puree manufacturer opens a production hub in New Mexico; and 26 people were killed in a crash involving a tractor-trailer in Mexico.

Uber Freight report says cross-border trucking showing continued resilience

While the road ahead remains rocky for most segments of the global trucking sector, nearshoring of manufacturing to Mexico will continue to boost cross-border freight flows in North America, according to Uber Freight.

The digital freight brokerage service recently released its second-quarter update on global freight markets, which points to more exports from Mexico to the U.S. this year.

“The opening of new manufacturing companies in the country due to nearshoring is anticipated to affect the market imbalance between northbound and southbound shipments,” the report said. “Mexican portions may face inflation again as demand for exports increases.”

Ben Enriquez, Uber Freight’s head of Mexico logistics and customs, said cross-border trucking will be stronger during the second quarter compared to domestic trucking in the U.S.

“Cross-border will be more resilient. There are a lot of manufacturing companies [in Mexico] that are shipping direct to U.S. distribution centers for consumers,” Enriquez told FreightWaves. 

In the U.S., manufacturing output shrank 1.1% year over year (y/y) in March. Manufacturing output, which has fallen over the past six months, shows no signs of increasing during the second quarter, Uber Freight said. It expects the lower U.S. manufacturing output to translate into lower freight volumes.

Enriquez said while Uber Freight expects to see a slight decrease in exports from Mexico to the U.S. during the year, the arrival of more manufacturing companies in Mexico is having a positive effect on freight movements.

Mexico has been experiencing a nearshoring boom and expansion of foreign companies in the market, led by Texas-based automaker Tesla’s plan to build a $5 billion electric vehicle factory near the Mexican city of Monterrey. 

“We are seeing decreasing volumes from some of our old customers, but there are new customers that are also settling in Mexico, so we think that’s helping trade,” Enriquez said.

Another key difference between the U.S. domestic market and cross-border trade is available capacity, according to Uber Freight.

“The market remains oversupplied as freight capacity remains resilient and demand falls,” the Uber Freight report said. “Despite a stronger-than-expected January, truckload demand continued its downward trend, and was 1% lower y/y in Q1, while supply was 7% higher as trucking employment remained strong.”

In comparison, Enriquez said freight capacity in Mexico could tighten down the road as more manufacturers ramp up production and need truck and intermodal service.

“There’s going to be a point where customers that are slower right now or have lower volume, while these new customers are starting to ramp up, when all of them start ramping up, then that’s when lack of equipment is going to happen,” Enriquez said. “Shippers have to be ready with their carriers to supply all freight service they need, along with different modes of transportation and border crossing points, etc.”

Trucking capacity could tighten in Mexico as more and more manufacturers ramp up production and need truck and intermodal service over the next several quarters. (Photo: Jim Allen/FreightWaves)

Other factors that will impact U.S.-Mexico trade this year includes cargo theft and the enforcement of Mexico’s Carta Porte bill of lading supplement for customs brokers, Enriquez said.

The Carta Porte supplement is a digital tax document issued to shipments aimed at protecting the transfer of legitimate goods across Mexico. The supplement went into effect in January 2022, but the Mexican government postponed enforcing fines and penalties because of errors in the document until August.

“I think that carriers by this time should have had enough time to get ready for the Carta Porte, but there’s still going to be challenges,” Enriquez said.

Mexico also recorded more than 10,000 cargo theft incidents during the third quarter of 2022, the Uber Freight report said.

“One of the big challenges we are seeing today in Mexico is the security of the highways,” Enriquez said. “If we look at most of the theft that is being done today, it’s happening in the interior of Mexico, between Mexico City, Puebla and Guanajuato.”

Enriquez said Mexican authorities should take cargo theft more seriously.

“We’re seeing that it’s increasing and organized crime needs to be somehow controlled because cargo theft is increasing in many industries, especially consumer packaged goods and foods,” Enriquez said.

3PL secures $100M to expand network of cross-border warehouses

San Diego-based XB Fulfillment recently received $100 million in private equity funding, which it will use to accelerate expansion of its logistics warehousing, according to a news release.

The funding came from Los Angeles-based Caprice Capital Partners LLC and follows an earlier 2021 funding round.

Founded in 2014, XB Fulfillment is a 3PL that services e-commerce platforms, providing fulfillment and warehousing services. XB Fulfillment enabled its customers to deliver over 22 million orders to their U.S. consumers last year, the company said.

XB Fulfillment currently has four warehouses in Mexico and plans to use the new funding to expand its capacity by 60% and broaden its geographical presence. The company did not specify how many warehouses will be part of the expansion or their locations.

Pepper puree manufacturer opens production hub in New Mexico

New Orleans-based Louisiana Pepper Exchange, a global chile pepper company, recently announced plans for a processing and distribution facility in Santa Teresa, New Mexico. 

The new facility will be located on a 10-acre site at the Ironhorse Industrial Park. The investment will include a 40,000-square-foot processing facility along with space for tank farms that can store 30 million pounds of pepper mash for sale and distribution throughout the U.S.

Officials for Louisiana Pepper Exchange cited Santa Teresa’s strategic transportation advantages in processing pepper imports from Mexico and Central America as one of the reasons for choosing the site.

“Santa Teresa is the perfect location for Louisiana Pepper to thrive,” Zach Foster, the company’s chief financial officer, said in a news release. “It is a rail-served industrial park with an overweight truck zone that can support our supply chain out of Mexico.”

The company did not specify when the new facility will open. Louisiana Pepper Exchange produces pepper ingredients for industrial food manufacturers, restaurants and home kitchens.

26 killed in crash involving tractor-trailer in Mexico

A collision between a freight truck and passenger van in northern Mexico left 26 people dead, according to Reuters.

The accident occurred May 14 on a highway near Ciudad Victoria, which is located in the Mexican state of Tamaulipas along the U.S.-Mexico border.

Mexican authorities said it’s unclear what caused the collision between the tractor-trailer and passenger van, but it started a fire that engulfed the van.

The tractor that had been pulling the freight trailer was not found at the scene. Authorities said they were investigating if the driver uncoupled the trailer and fled the scene or if he was also killed in the accident.

Watch: How the new forecast affects large carriers.

Click for more FreightWaves articles by Noi Mahoney.

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