Importers from Mexico are increasingly turning to ocean services connecting to Florida ports to serve central Florida and the Southeast, avoiding the risks of higher costs, longer transits, and sharper delays from conventional land routes across the US-Mexico border.
The Port of Tampa Bay says cargo volume on two routes started two years ago have increased dramatically — by 232 percent in 2017 and a 90 percent increase predicted this year — in large part serving the central Florida consumer market. And the port is looking to leverage that business to encourage shippers to consider moving cargo into Atlanta, South Carolina, and even the Northeast from the port.
Port Miami began investigating ways to increase Mexican business five years ago, but progress really picked up when Grupo México Transportes purchased Florida East Coast Railway from Fortress Investment Group in 2017.
Eric Olafson, Port Miami director of global trade and business development, used an example of moving a container from Central Mexico to Atlanta to explain how ports can be attractive.
“If we do it all trucking, it would take six days and $6,000,” he said. “If you go to the coast and send it from either Veracruz or Tampico to Miami and then up to Atlanta, it would be four days and the cost all in would be $3,500 to $4,000. So not only do you save time, but you also save money.”
Sea also offers a simpler move, the ports say. Cross-border freight by land, while a thriving business, is also one that involves multiple trucks, stopping points, extensive paperwork, and a third-party logistics company to handle the cumbersome process.
So far, the two ports are still only seeing small cargo volumes on the route. Tampa Bay’s cargo from Mexico totaled 8,554 TEU, and Miami’s totaled fewer than 10,000. About two-thirds of the cross-border traffic between the United States and Mexico goes by truck, about 13 percent by sea, and about the same by rail, said Raul Alfonso, executive vice president and chief commercial officer, Port Tampa Bay.
Given truck capacity concerns, shippers diversify
But the combination of difficulties in moving by land has prompted some shippers to look for alternative freight routes, Jose Minarro, senior vice president, Mexico customs, for Transplace, told the JOC Mexico Trade Forum on Aug. 1.
“We hear customers more and more trying to diversify, trying not to put all their eggs in one basket,” he said. “So we’ve seen tremendous growth in intermodal, versus pure truck in the last five years,” and it could include sea and air, he said.
Still, convincing shippers and truckers to try a new route is not easy, said Craig Mygatt, CEO of SeaLand, a Maersk Line affiliate that serves mainly the United States and Latin America. One challenge is to overcome the “cultural aspect” that shippers stick to their existing routes. Another is that trucking cargo across the border offers shippers more flexibility than does sea, he said.
“So if you get to Laredo, you can sell your avocados over to Florida, or you can sell them to New York, or Chicago, or Los Angeles,” he said. “And you can look at the pricing of the avocado in those different markets, and divert cargo that normally would have run to Philadelphia and say ‘Ok, the LA market is strong right now, let’s shift and de-van, sell our avocados to LA.’”
The difficulty of matching that flexibility was one of the factors cited by Port of Philadelphia officials for the discontinuance of the port’s SeaLand service from the ports of Altamira and Veracruz in the spring of 2017, about a year into its operation.
Truck traffic from Mexico into the United States rose 3.6 percent in the first quarter, US Bureau of Transportation Statistics (BTS) data show. The dollar value of US-Mexico trade by truck from January to May 2018 increased 12.2 percent over the year before, to $174.1 billion, according to the BTS figures. The weight of US-Mexico trade by truck increased by 14.6 percent over the year before, the figures show.
At Laredo, Texas, the largest border crossing by truck volume, the number of trucks across the border increased by 6.5 percent to 1.15 million in the first six months of 2018 over the same period a year before.
Strong freight demand and higher trucking rates within the United States mean fewer trucks are available this year for northbound loads at the US-Mexico border. Shippers are traditionally hit hard in the spring and early summer, the peak produce shipping season from Mexico, when the imbalance in northbound and southbound shipments between the United States and Mexico creates a shortage of trucks and containers. And this year, it has been worse, with an imbalance rising to about three northbound trucks to one southbound truck.
When it’s moved by land across the US-Mexico border, freight is typically consolidated at its starting point in Mexico and placed on a truck that is dropped and hooked to a cross-border Mexican trucking company. Meanwhile, Mexican and US customs brokers send paperwork to respective governments. On arrival at a crossing point, the Mexican truck drops the freight, which is then hooked up to a US truck, because most carriers are unable to meet the requirements to operate in both countries.
Getting to the border can take a 24-hour drive from Mexico City, an 18-hour drive from Durango, or an eight-hour drive from Monterrey. Inspections — whether customs, US Department of Agriculture, drug or explosives, or other checks — can add up to three hours. And in the current environment, finding a truck to take the container on the next leg on a northbound move could add several days, Minarro said.
The process at the moment is made more difficult by the lack of capacity on both sides of the border, largely due to driver shortages and a difficulty finding equipment. US capacity has been impaired by the electronic logging device rules that took effect in December. And two new regulations in Mexico, which require double-tractor trailers to be registered with the government and limit driver hours, are expected to further tighten capacity there.
Florida port officials look at these logistical hurdles and see opportunity. “On an average day, there is an average of 25,000 border crossings on land and the value of US-Mexico trade shipments was $557 billion last year,” said Olafson. “So even a small percentage changing over to water would be significant.”
That’s partly because Mexico is, at present, not a big trading partner with the Port of Miami.
Mexico’s 2017 volume of fewer than 10,000 TEU sent to Miami is 14th among countries sending cargo to the port — well below the 140,000 TEU sent each year by China and below the 15,000 to 25,000 TEU sent by Honduras, Guatemala, and the Dominican Republic. Port Everglades officials have been approached too, although its main trading partners are in the Caribbean, Central America, and South America — not Mexico.
The Port of Tampa Bay cites speed as a key advantage, saying it takes two to two-and-a-half days’ sailing time to reach Tampa from the largest Gulf Coast ports in Mexico, among them Altamira, Tuxpan, and Veracruz.
From Tampa Bay, it takes an additional one-and-a-half days by truck to reach South Carolina from Tampa, and two-and-a-half days to make that trip by rail, for a total of four to five days from Mexico’s Gulf Coast to South Carolina, Alfonso said. Taking cargo from Tampa Bay to the Northeast takes three days by truck, and six days by rail — for a total of about five to eight-and-a-half days from Mexico’s Gulf Coast to the Northeast, the port says. Transit from Miami northward takes roughly the same time because trucking from Tampa Bay to Interstate 95 washes out Miami’s southernmost location.
The reliability factor
“If at the end of the day our supply chain is more reliable, has a shorter transit time, offers savings, and allows the shippers to grow to be successful, I think we’re on the right track,” Alfonso told the JOC Mexico Trade Forum.
“Ocean, with rail, with truck, works,” he said. “There’s got to be an evaluation process for all of the shippers and logistics supply providers to analyze what are the real costs, what are the real deficiencies.”
The ocean alternative also offers the benefit that it would provide cargo going north to the many truckers that bring cargo for the central Florida consumer market, and would otherwise have to go back empty because there is little northbound cargo, Alfonso said.
Mygatt said sea is also cheaper because it burns less fuel per container. Taking a single container from Mexico City to Miami by truck would use about 350 gallons of fuel, compared with about 80 gallons by ocean on a ship that is 80 percent full, with a short truck drive to the port in Mexico, he said.
And sea moves get more attractive to shippers the farther into Mexico a load originates, he said. While it’s tough to convince a shipper moving cargo from close to the border that a sea move is better than trucking, “down near Mexico City, that really has a lot of potential.”
“Truckers are going to have to drive that much more distance, and the shortage of truckers and drivers could create a bottleneck,” he said. “And once you have a bottleneck then people find a solution.”