The U.S. Class I railroads say they're ready to handle any influx of business that might occur at the U.S.-Mexico border as a result of nearshoring and shifting consumer patterns.The trade deal between the U.S., Mexico and Canada (USMCA) helped to lay a foundation for continued trade among the three countries, while the coronavirus pandemic has raised some questions about expanding sourcing beyond China. Tensions between the U.S. and China, as well as consumers' preferences to access goods more readily, have also factored into the issue of nearshoring."With our network, capacity and expertise, BNSF's Mexico intermodal service is well-positioned to help shippers take advantage of anticipated growth in the movement of consumer goods to and from Mexico," Paul Hirsch told FreightWaves. Hirsch is the assistant vice president of the Mexico business unit for Western railroad BNSF (NYSE: BRK).Hirsch said shifting trends in the U.S. and Mexico in what consumers expect when they purchase goods "is driving different requirements for those of us that are part of the supply chain.""In this changing world, supply chain partners must work together to make the process more responsive and adaptable. Intermodal is part of the transportation strategy for some of the largest cross-border shippers because it reduces their risk, increases their capacity and reduces cost," Hirsch said. Among the offerings that BNSF has that it could use to capitalize on increased cross-border rail volumes are a joint intermodal service with Kansas City Southern (NYSE: KSU). The service runs five days a week between Monterrey, San Luis Potosí or Toluca in Mexico to/from Dallas/Fort Worth or Chicago, with additional southbound service to Laredo, Texas. BNSF also has connections with Ferrocarril Mexicano, which "offers the region a simple way to reduce trucking costs and delays," Hirsch said. That service provides intermodal service between Chicago and Silao. Hisrch also said BNSF has a bilingual intermodal sales team in the U.S. and Mexico who are knowledgeable on U.S.-Mexico import/export requirements, and it facilities cross-border shipments at San Diego, El Paso, Eagle Pass, Laredo and Brownsville, with potential originations and destinations along the West Coast and the Pacific Northwest. "We have seen continued growth for all these service options and moving forward we will continue to introduce new ones that meet our customers' demands," Hirsch said.Meanwhile, Kansas City Southern's (KCS) President and CEO Pat Ottensmeyer recently said at a trade symposium sponsored by the U.S. Customs and Border Protection that Mexico stands to benefit from more companies moving manufacturing to North America amid pandemic-induced international trade disruptions."We believe that with the USMCA in place, there is more certainty about North American trade going forward and the company's strategy is aligned with our customers' cross-border needs," KCS told FreightWaves. To accommodate growing volumes, KCS is seeking to add more international crews at the bridge in Laredo, Texas, to improvise network fluidity there, and it is building a second international bridge. KCS recently received a presidential permit to build a second bridge at Laredo, and the bridge could handle up to 30 cross-border crossings daily.The railroad is also working "with beneficial owners to learn about each other's needs to grow this very important corridor," KCS said. "KCS is focused on growing cross-border volumes. We are working with our channel and railroad partners to improve service and add markets that we do not yet serve," KCS said.In Houston, KCS has an intermodal and automotive terminal at Kendleton, Texas, which services the Houston and Mexico markets, KCS said. The terminal still has available capacity for intermodal and automotive, and there is KCS-owned land around the terminal available for development. KCS also said it has industrial development professionals in the U.S. and Mexico to assist businesses looking to expand and build their nearshoring capabilities. Union Pacific (NYSE: UNP) is also seeking to develop its intermodal assets in Houston, with investments planned between Englewood and Settegast.The company said last month that it was consolidating its intermodal operations in the Houston area this fall as part of its broader efforts to implement its version of precision scheduled railroading and simplify ramp operations. At the Settegast facility, Union Pacific (UP) will continue to handle its current intermodal and manifest business and it will take on the intermodal shipments currently managed by the Englewood yard. The Englewood facility will then have additional capacity for UP's manifest operations. UP intends to expand switching capability at the Englewood yard as a means to run longer trains out of that yard."This shift will further improve the network fluidity in the Houston area, providing you with safer and more consistent service – a major win for all customers," said UP Executive Vice President of Marketing and Sales Kenny Rocker last month.UP executives have said that nearshoring could benefit customers who are "on the margin" and who were impacted by the coronavirus-related factory shutdowns in China earlier this year and by subsequent shutdowns within the U.S. supply chain. "We haven't seen any customers make any really concrete bets yet on their shoring. I will tell you, we feel good about the service product and the interchange points that we have coming out of Mexico," Rocker said during UP's second-quarter earnings call in July. UP has said it is the only U.S. carrier with access to six gateways with Mexico. "The one thing that a number of folks have really harped on ... is our premium and our intermodal network. And what I'll tell you is that our manifest network, our carload network, benefits from a stronger service product." Rocker continued, "A lot of these short-term, short-haul lanes we're able to compete in are because we do have a lower cost structure. ... And so as you think about nearshoring, it becomes more of a sweet spot for us and we'll be prepared for it if it comes on."Click here for more FreightWaves articles by Joanna Marsh.Related articles:Borderlands: Mexican rail blockade costing millions; Toyota, VW expanding in MexicoUSMCA pushes Asian company to expand in MexicoCommentary: Is outlook for Mexico's rail freight still relevant?New USMCA trade deal could increase demand for nearshoring in MexicoCommentary: USMCA is imminentSee more from Benzinga * Container Rates Are On Fire. 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The railroad industry is one of the major components of the transportation sector and is closely tied to the economy's growth. Railroad companies operate vast networks that transport agricultural products, packaged foods, commodities, electronics, and other goods to companies and consumers.
Kansas City Southern (KCS) (NYSE:KSU) will release its third quarter 2020 financial results on Friday, October 16, 2020, before the opening of trading on the New York Stock Exchange.