Cross-border 🇺🇸🇲🇽Market Update
April 2024, Vol. IX
Monthly cross-border updates curated with insights from our experts.
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At Nuvocargo, we simplify U.S./MX cross-border trade, shining a light into the black box at the border for greater control and visibility. In this month's edition, we explore several key topics: data suggesting an improvement to the freight recession, Nuvocargo's use of data models and AI to streamline cross-border logistics, an analysis by our data team on various freight types, the potential for nearshoring in Mexico as outlined in a McKinsey report, and the growth of the Texas-Mexico Automotive Cluster over the past decade.
Read on for some of the top trends and insights on cross-border trade, curated and analyzed by Nuvocargo’s team of experts.
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Cross- Border
Market Updates
How much longer will the freight industry stay in a recession? This question has been on the minds of most players in the industry for the past two years, as they navigate through a market that appears to be reaching its lowest point before rebounding. Freightwaves' proprietary platform, SONAR, has supplied ample data to reinforce the growing optimism that the recession is coming to an end:
• The current tender rejection rate is 3.95%, an increase from this year's lowest rate of 3.39% on March 26 and significantly higher compared to 2.88% a year ago. As the rate of tender rejections rises, indicating more freight movement refusals, it creates more opportunities in the freight market, signaling a healthier industry.
• Contracted load accepted volumes, an index that measures demand for contracted loads, show significant market growth since January 2023. As of April 15, 2024, these volumes have increased by 9% compared to last year. This marks the closest approach to the peak volumes seen during the COVID-19 bull run in April 2021, now just 6% below those levels.
• If the US economy grows above 2% for the rest of the year, we expect that contracted load accepted volumes in 2025 will surpass 2021 peaks. Historically, the freight market has grown at a rate that doubles the GDP.
All these data points suggest that the freight industry's balance between supply and demand could recover as early as fall 2024, but almost certainly by spring 2025.
• According to the Energy Information Administration (EIA), diesel prices went up slightly- .012 cents per gallon on average nationwide- in April compared to last year.
• According to DAT, the national average dry van linehaul rate decreased by 1 cent per mile for the second week to just over $1.56/mile last week. Linehaul rates are $0.05/mile lower than the previous year.
• The Logistics Manager’s Index rose to 58.3, showing growth for the seventh time in eight months and the fastest expansion rate since September 2022.
• According to the Bureau of Transportation Statistics, the value of goods traded between the U.S. and Mexico increased 9.9% in February 2024 compared to the previous year, a nine-month continuous growth streak.
The "Domestic Transportation Mode of Exports and Imports by Tonnage and Value" dataset from the U.S. Bureau of Transportation Statistics (BTS) offers deep insights into truck freight, rail, ocean, and intermodal transportation, providing a detailed look at freight volumes and values across these modes. Our data team looked into this officially released dataset to dissect performance metrics, helping the market pinpoint operational efficiencies and economic impact specific to various transportation options. By leveraging this data, businesses can strategize to optimize routes and modes for cost-efficiency and speed. This strategic advantage is crucial in maintaining a competitive edge in the dynamic environment of US-Mexico logistics.
Facts and Figures
By the Numbers: Types of Freight
• Due to extensive road networks, OTR (over-the-road) freight will remain crucial in efficiently transporting goods across the US-Mexico border, offering unrivaled door-to-door service.
• This mode provides high flexibility and direct route capabilities, making it ideal for goods from perishable items needing quick delivery to less sensitive bulk materials.
• Its drawbacks include limited capacity and environmental concerns linked to fossil fuel use.
• Despite these challenges, innovations like Nuvocargo’s route optimization program can demonstrate the industry's commitment to enhancing sustainability by directly integrating green and AI technologies where emissions occur.
In the broader context of freight options, road freight's adaptability and cost efficiency often make it the most viable option for time-sensitive and intricate logistical needs across North America. As the dynamics of US-Mexico trade deepen, the continuous improvement in road freight technologies and processes is vital to maintaining the efficiency and sustainability of cross-border supply chains.
Editors Picks
Nearshoring Beat
Nearshoring has become a mainstay when speaking about US-MX relations. In March, McKinsey published a report called Unlocking Mexico's Nearshoring Potential: A Dynamic Assessment of its Evolving Landscape and Promising Trajectory.
Here are some of the most relevant findings:
• In 2023, around 7.5 million loaded trucks and rail containers crossed from MX to the US, a 34%+ increase from 2022.
• 50% of Mexico’s 2023 FDI corresponds to manufacturing, representing a 28% growth in the sector vs. 2022.
• 35% of companies surveyed view Mexico as a top nearshoring location.
• The investment announcements in 2023 were 2.5x higher than in 2022.
• As of March 2024, February 2024 has been the month with the largest investment announcements.
• USD 41 Billion comes from first-time arrivals, with the infrastructure and automotive industry leading the way. Seven out of the ten largest investments belong to the auto industry.
• 59% of the announced investments for the year are valued at more than 1 Billion USD.
• Selecting the proper site when beginning a nearshoring project is essential, and the states closest to the border (Nuevo León with 79, Coahuila with 34, Chihuahua with 13) have captured 55% of these investments.
• The monthly average for loaded containers crossing from MX to the US reached a historic high, with a monthly average rise in crossings of 38% throughout 2023.
Tough Freight Market on its way to recovery.
Trends and Patterns Analysis
Keep an eye out for more Nuvocargo cross-border market updates, coming soon. And if you want to receive more insightful content from Nuvocargo, click the button to join our newsletter.
Trucks lead in freight volumes, making them the top choice for domestic exports and imports. Pipeline transport is steadily growing, driven by the energy sector's need for bulk liquid and gas transport. Rail transport is also rising, reflecting its capacity for large volumes over land. Although water transport has seen fluctuations, it maintains a long-term upward trend, which is crucial for intercontinental and heavy freight. Air transport, including truck air, starts with lower weights but is slowly increasing, suitable for urgent or high-value shipments.
Facing US pressure, Mexico will halt incentives to Chinese EV makers via Reuters.
A central Amazon and Nvidia supplier has found the new AI hotspot via Microsoft Start.
Compliance simplified with NuvoOS for Complemento Carta Porte 3.0 via Nuvocargo.
Expert’s Take
Using structured data and AI to simplify Cross-Border Logistics.
Since last year, the demand for AI-driven solutions has surged as companies tackle their most complex challenges and processes. Nuvocargo has embraced this trend, which is why we interviewed Chloe Wang, our Head of Data. The interview aimed to gain insights into how our data is structured and the types of results we can derive from it.
The dataset outlines the economic performance of various transportation modes in terms of freight value in the past and future. All transportation modes show a general increase in freight value over the years, indicating an overall growth in the transportation industry's economic contributions. Truck mode consistently shows the highest freight value across the years, highlighting the trucking industry's critical role in transporting valuable goods, likely due to its flexibility and extensive reach.
A Promising Outlook by McKinsey & Co.
According to a recent study by Accenture, the Texas-Mexico Automotive Cluster (TMASC) (which is comprised of Texas, Coahuila, Nuevo LeĂłn, Tamaulipas, and San Luis PotosĂ) has witnessed a 55% growth in the last ten years, with over 18 Billion USD in direct value added to the region's economy.
The study states, "The increase in motor vehicle production in the TMASC over the last decade has been primarily driven by new original equipment manufacturers (OEMs) in Nuevo Leon and Coahuila, while production in Texas has remained relatively stable. However, it is expected to increase as production accelerates at Tesla's Gigafactory in Texas."
Some additional highlights:
• The TMASC contributes 10% of the regional GDP.
• This cluster includes 16 assembly plants from 12 Original Equipment Manufacturers (OEM) companies and over 300 major suppliers.
• The Texas-Mexico Automotive Cluster produces 1.5 million light vehicles and 170,000 heavy commercial vehicles annually (2022).
• The automotive industry currently employs 50k workers in Texas and as many as 400k in Mexico.
• This cluster represents 6% of the entire manufacturing industry value for Texas, Coahuila, Nuevo LeĂłn, Tamaulipas, and San Luis PotosĂ. Eighteen billion USD in direct value has been added.
• Over the past decade, around 170,000 new motor vehicle manufacturing jobs have been created in TMASC, with job growth outpacing national averages.
Texas-Mexico Automotive Cluster Takes Off
US-MX Trade Relationship
Nuvocargo’s opinion
“The main challenge of having a tool or software like NuvoOS is that data is being generated at every moment. Having the discipline and vision to build a structured model that consistently generates reliable data for different teams to transform and consume creates efficiencies and AI algorithms that will only simplify the complexity of cross-border logistics today.” - Chloe Wang, Head of Data.
You can read more about her thoughts here.
Following the explorations of how goods are transported across the US — through air, land, sea, or mixed — key insights have emerged, particularly pertinent to US-Mexico truck freight operations. Each mode of transport, whether by sea, land, or air, presents unique advantages and challenges, shaping the choice based on cargo type, urgency, and route characteristics. Understanding these nuances is crucial for those managing freight between the US and Mexico.