“Cars drive train (boom)”

The (slightly altered) title of this post stems from a great sub-title in “Trains, planes and automobiles: Mexico rail freight comes of age“.   I learned some interesting tidbits about Mexican shipping and exports from this relatively short article  For instance,

1. Rail traffic is booming in Mexico: “trains now haul about 14% of the nearly $500 billion worth of goods that cross the Mexico-U.S. border each year, up from 10% in 2009.”

2. The industry is relatively concentrated, with 2 companies (Kansas City Southern de Mexico and Grupo Mexico) making up almost all of the market. Grupo Mexico controls 55% of the market, while KSCM controls the rest.

3. There are several factors behind the railroad surge, but one of the largest is the booming auto market in Mexico.  Cars and car parts only made up 4% of KSCM’s cargo in 2011–by 2012, it had grow to 16%.  Ferromex (a subsidiary of Grupo Mexico) has seen its automobile cargo double since 2007.

4. It’s cheaper to ship cars via train (sometimes 20-50% lower), but of course you cannot offer “door to door” service.  Border security apparently has an x-ray machine by the tracks and trains clear customs in less than hour on average, compared to 133 minutes for trucks.

5. On the other hand, in what seems like a 19th century problem, bandits are still a problem: “Mexico has among the highest incidence of cargo theft in the world…Ferromex spends 33 million pesos ($2.5 million) a month on staving off thefts and attacks” and “the Ministry of Communications and Transport has begun looking into the possibility of creating a dedicated rail police force.”

6. Only the government can decide to open new rail lines, which hinders the growth potential of the two companies. Apparently we shouldn’t feel too bad for the companies, however.  As one rail station executive noted: “Railways are cash cows. If you don’t pay me, I don’t deliver.”

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