Cross-border trade is strong but could be affected by everything from driver shortages to the freight imbalance to the Mexican peso in 2021.
FreightWaves recently caught up with Troy Ryley and Jordan Dewart from Redwood Mexico, part of Redwood Logistics, a logistics platform company headquartered in Chicago.
Redwood Logistics’ portfolio includes digital freight brokerage, freight management and platform services that aim to simplify supply chain technology.
Ryley is president of Redwood Mexico, based in Austin, Texas, and Dewart is a manager director based in Laredo, Texas.
Ryley and Dewart offered up their observations on several topics, including increased production in Mexico, the imbalance of cross-border freight, lack of truck drivers and how the Mexican economy could affect freight movements in 2021.
FreightWaves: What’s happening right now at the U.S.-Mexico border?
Dewart: Right now in Laredo we are seeing up to 5,000 trucks a day crossing the border out there. So that’s far ahead of 2020 and 2019. Freight has come roaring back.
FreightWaves: Are we seeing production levels rising at Mexican factories? Is that the reason for the increase in trucks and freight?
Dewart: It’s something that we typically see, you know, production ramping up immediately after the year ends after factories shut down in December in Mexico. But obviously, it’s more than that. It’s just a continued high level of demand from U.S. employers in all sectors — retail, health care, consumer electronics, automotive.
Ryley: One thing you’re still not seeing is a drastic increase in [Mexico] consumption. With southbound traffic to Mexico, there was a mild uptick in southbound traffic during December in the Christmas month, which is usually the highlight of the year as far as southbound. Now that’s dropped off. We’re still seeing that heavy imbalance of northbound versus southbound loads. There’s a lot more production and sourcing from Mexico into the U.S., but not a return for the consumption.
FreightWaves: What’s the warehouse situation like in Laredo right now? Is there enough space for goods coming across the border?
Ryley: It has improved slightly, only because there’s new buildings coming onto the market. The commercial occupancy rate in Laredo is still in the high 90s. We don’t expect that to change in the near future because trade is still strong. We’re going to see again a tremendous amount of freight being transloaded.
FreightWaves: What is the situation like for available tractors and trailers at the border?
Ryley: There is a lot less U.S. equipment going into Mexico now, where the traditional model was somebody wanted to load a U.S. trailer so they didn’t have to transload at the border. There is just not the amount of equipment going into Mexico anymore because the return on investment on a trailer for U.S. carriers is much stronger in the U.S. than it is having it going to Mexico for three weeks. Mexican carriers have been very conservative about their investment in equipment because they’re uncertain of what the markets look like. They haven’t changed their tractors and trailers. The net-net is that there’s just less equipment in general available.
FreightWaves: Is there a shortage in linehaul drivers that has resulted in higher premium shipping costs?
Dewart: We’re definitely seeing that on both sides of the U.S.-Mexico border. There’s a shortage of drivers on both sides. We’re also seeing, and this is related to the cross-border trade, that U.S. carriers are not allowing their trucks to go into Mexico or trailers to cross into Mexico. For the simple fact that since transportation rates are so high domestically in the U.S., we can continue to make a great wage here without needing to send their trailers into Mexico and that exacerbates the situation for drivers.
Ryley: We are actually seeing more Mexican drivers having the option of being B-1 visa drivers in the U.S. Therefore, they’re leaving the Mexican transport companies and trying to find work with U.S. companies to earn a higher wage rate, better rates, better benefits. (A B-1 visa can be issued for a truck driver residing in Mexico and delivering freight in the U.S. B-1 visas are issued by the U.S. government.)
FreightWaves: How will the Mexican economy affect cross-border trade in 2021? The Mexican peso is at 20.17 pesos per U.S. dollar as of Thursday.
Ryley: The Mexican peso has actually revalued from earlier [in 2020]. In March [2020] the peso hit a high of like 24 pesos to the dollar. It was devalued against the dollar fairly sharply. And then it’s revalued since then, which is quite rare. I think the peso has revalued because of some of the lackluster stability in the U.S. or uncertainties in the U.S. The peso was able to revalue from $24 at one point to around $19. You’re still well above what the peso was in 2019. That obviously, again, affects consumers as goods are still more expensive than they were coming in from anywhere in the world — and especially the U.S.
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