Mexico’s ports the focus of new Cushman & Wakefield study

Mexico’s growing importance in the continental supply chain is now being recognized by North American transportation groups, said John Morris, Cushman & Wakefield’s Industrial Services Lead, Americas. In the latest edition of its Industrial Research MarketNote, industrial real estate analysts observed that Mexican ports led the North American container trade in 2014 with 3.5 percent year-over-year growth.

This was followed by U.S. ports, with 2.6 percent growth, and Canadian ports, up 1.6 percent. Mexican ports led the growth in import volume, with a 9.2 percent year-over-year increase, outperforming overall North American inbound growth of 6.4 percent. In the past two decades, commercial cargo in Mexico has grown twice as fast as the nation’s GDP.

Mexico’s surge into automobile and parts manufacturing is clearly increasing in pace. In 2014, light vehicle manufacturing in Mexico reached a record high with three million vehicles produced and the country ranked as the seventh largest producer of light vehicles in 2014.

As Mexico’s rising middle class demands more imports and the country rises as a regional manufacturing powerhouse, the Mexican government is pumping $5 billion into its network of ports to keep pace with growth.

The report does not address cargo security issues, however. Gonzalo Gutierrez, Cushman & Wakefield’s executive director – Monterrey Northeast Region, Industrial Brokerage Services, admits that Mexico has faced a major challenge in its fight against organized crime.

“But the Mexican and U.S. governments are working together to weaken the network of crime, and there has never been closer cooperation between the two countries. With that said, information about the situation in the country must be put in perspective,” he said.

Mexico’s underlying story is strong and getting stronger, added Gutierrez.  Notwithstanding the current drug-related violence, the foreign direct investments for huge OEM’s and other big manufacturing companies still arriving every year, the country’s macroeconomics are in good shape; foreign visitors keep coming back to visit despite the unsavory news headlines; foreign governments are actively courting trade and commerce with Mexico; and expats living here are going about their lives normally; and according with “Mexico Insight” statistics continue to show that Mexico’s levels of general crime and violence continue to be lower than those of most large U.S. cities.

Key takeaways from the Cushman & Wakefield’s report are these:

*Modernization of Mexico’s port system is crucial if the country is to take advantage of its strategic assets. Mexico has become a major supplier of vehicles, electronics and other goods for the U.S. consumer market (82 percent of automobiles produced in Mexico are exported to American consumers), so the ports are very important in the dynamic to attract investment into the Mexican manufacturing sector.

*President Peña Nieto is pushing forward 25 new projects - including an expansion at the port of Veracruz which will triple the port’s capacity over the next 25 years. Gulf port of Veracruz expects to increase its capacity by more than 400 percent via a $1.8 billion expansion program that will involve the construction of two container terminals over four years, ending in 2018. The port’s expansion will increase its capacity to 88 million metric tons, and add 35 new berths, including two new turning basins, a logistics center for ground transportation and a 13-mile-long double-track railway bypass. Work on the port in Veracruz is expected to run Mexico roughly 27.5 billion pesos, close to $2 billion. Trade volume at this port has soared from 543,000 twenty-foot equivalent units (TEUs) in 2001 to nearly 850,000 in 2014 and a projected 894,000 TEUs this year.

*The Port of Lazaro Cardenas along the Pacific coast is now handling 1 million TEUs a year. During the first five months of 2015, LCT moved 310,000 TEUs of cargo, up 30 percent year-over-year. This port has a key asset - its on-dock rail facilities are provided by Kansas City Southern de Mexico S.A. de C.V., which is a subsidiary of American railroad, Kansas City Southern. This linkage provides Lazaro Cardenas on-dock intermodal links directly into the southern U.S. as well as the shortest route to Mexico City. To coincide with growth in consumer spending in both the U.S. and Mexico, a new TEC2 deep-water container terminal is scheduled to open in mid-2016, which will be the first automated terminal in Latin America. According to a recent report by BMI Research, APM Terminals’ new deep-water terminal at the port of Lazaro Cardenas will strengthen the Pacific port’s role in Mexico and U.S. supply chains. The $900 million project will include an intermodal transport corridor, which links Lazaro’s marine terminal with APMT’s Mexico City intermodal facility.

*Puerto Manzanillo, the country’s largest port, handled 2.4 million TEUs in 2014. In 2005, this port only handled 872,569 TEUs and since year-end 2010, container volume has increased by 55.8 percent. Manzanillo is the only port in Mexico capable of double-stacking containers onto railcars, providing efficient movement of cargo throughout Mexico and as far as the Texas border 1,000 miles away. With nearly 90 percent of Mexico’s trade being with the United States, Manzanillo’s access to the western coast, as well as to Houston via rail and other eastern seaboard destinations via the Panama Canal, is seen as key to attracting investment.