Cross-border 🇺🇸🇲🇽Market Update
December 2023, Vol. V
Monthly cross-border updates curated with insights from our experts.
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The end of the year is usually a time to reflect on the past and to look forward to the trends that will shape the future of our industry. This cross-border update delves into the prevailing trends of the current year and provides insights into the factors expected to influence the U.S.-MX cross-border trade in 2024. Key highlights include the resurgence of the transportation market following a year-long recession, increased investment in digital logistics, the further diversification of supply chains, as well as a look into what nearshoring is bringing to this trade corridor.
At Nuvocargo, we are focused on simplifying U.S.-MX cross-border trade with a specific emphasis on shining a light into the black box at the border. Read on for some of the top trends and insights on cross-border trade, curated and analyzed by Nuvocargo’s team of experts.
Enjoy!
Facts & Figures
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Keep an eye out for more Nuvocargo cross-border market updates, coming soon.
Cross- Border
Market Updates
• Diesel prices dipped a full .103 cents per gallon on average nationwide in the last month according to the Energy Information Administration (EIA).
• Average outbound linehaul rates have followed seasonal patterns, decreasing by $0.01/mile, they are also $0.14/mile lower than last year and within $0.01/mile from 2019.
• Even though the Logistics Manager’s Index (LMI) report clocked in at 49.4, a decline of 7.1 points, this has been attributed to firms quickly selling off inventory, which means that the logistics market expansion will most likely continue into Q1 of 2024.
• According to the Bureau of Transportation Statistics, there was a 4.1% increase in the value of goods traded between the U.S. and Mexico in October 2023 compared to the same period last year.
Customers are looking to minimize capital exposure in inventory, and having products close to manufacturing facilities or end customers is a key aspect of that. Even if we’re already seeing a lot of this impact, we are convinced that especially around transportation, we’re just at the start. Much of the nearshoring activity is still in its early stages, with the vast majority of cross-border volumes still coming from shippers and players who are already established in Mexico. So, we will continue to see a steady buildup in 2024 but expect the more transformative shift to take place in the mid to long term.
This year was marked by two key trends: first, the short-term volatility in the freight market evidenced by the down market and an unusually high capacity-demand gap; and second, the long-term opportunity of nearshoring, which is creating the right ecosystem for the exponential growth of U.S.-MX trade well into the future.
• Imports from Mexico surpassed China’s: For the first time in almost 20 years, the U.S. is importing more from Mexico than from China. The latest data showed that Mexico made up 16% in total trade with the U.S. in October compared to China’s 12.7%. A very telling trend reversal, considering that as recently as five years ago, China accounted for 20% of all U.S. imports.
• Migrant crisis prompts government-led inspections: Between Jan 2021 to Sep 2023, roughly 7.5 million immigrants, refugees and asylum seekers made their way to the U.S.-Mexico border, representing 500,000 more migrants compared to 2022. This prompted rigorous inspections that resulted in significant delays and disruptions throughout Q3 2023, with cargo truck wait times reaching up to 16 hours at crossings like El Paso. The Texas government’s response stranded 19,000 trucks carrying goods destined for the U.S. and resulted in at least $1.9 billion worth of goods being severely delayed. These inspections have since eased off and border crossings are back to normal.
• Laredo became the No.1 port in the U.S.: As of September of this year, imports were up 8% and exports 7% vs. last year, totaling $241 Billion through Laredo alone. The addition of 4 FAST Lanes (Free and Secure Trade for commercial vehicles), which takes 45 seconds at most for eligible trucks to be processed, contributed to Laredo becoming the top port in the U.S., servicing over 10,000 northbound trucks per day. Infrastructure projects to add more lanes to the bridge, as well as a new rail line, point to the growing influence of this port on the U.S.-MX trade relationship.
• Driver strikes due to hijackings in Mexico: Trade volume between the U.S.-MX has grown throughout the year. Unfortunately, so have the risks for drivers of long-haul trucks. According to the Borderless Coverage report built by Reliance Partners, hijackings have risen 8% from January to September 2023, compared to the previous year. As a response, the AMOTAC (Alianza Mexicana de Organización de Transportistas) planned to go on strike earlier this year, but were able to reach a deal with government officials to improve existing safety conditions on the road.
Nearshoring has been one of the most talked about trends in 2023 for the cross-border freight industry, but what does it mean for this trade lane? We give you a few data points to contextualize this trend:
• 42 new companies have opened up operations in Mexico this year, of those 28 have come from China.
• FDI in Mexico grew 30% from January to September 2023 compared to the same period in 2022.
• Nuevo Leon’s administration announced the expansion of the Laredo-Colombia bridge working in tandem with the Texas administration to facilitate trade between these two entities.
• Industrial space availability is at its lowest due to companies securing their future operations, expected to ramp up in 2024 and 2025. Only 2.1% of industrial space is currently available in Nuevo León, resulting in Mexican authorities looking to accelerate construction to sustain the nearshoring boom.
A look back at 2023
Nearshoring Wrap-up
Nuvocargo’s take:
Expert’s Take: Recap
• Vetting Mexican Carriers: A guide to ensuring shipment security & success- Our Head of Legal & Compliance, Josefina Blanco, put together a guide on how to vet carriers in Mexico for compliance with the quality standards for cross-border trade. You can read the full guide here.
• Navigating Customs Complexity: Insights into Nearshoring to Mexico- Our Head of Customs, Jay Gerard, delves deeper into the key role of customs in nearshoring operations from China to Mexico, from rules of origin and trade agreements to technological investments. You can read his full thoughts here.
• Trucking demand is up while capacity is down compared to this time last year. After a year-long recession, the transportation market is looking healthier. There are strong indications that in 2024 the entire market will be on the rise as the gap between supply and demand continues to narrow.
• Digital Logistic Investment on the Rise: A recent survey by McKinsey & Company of more than 250 global shippers and logistics providers shows that 93% of shippers plan to maintain or increase their technology investments over the next three years. These investments are mainly focused on creating tools that work for shippers and carriers to address shared challenges, like real-time transportation, visibility planning, and telematics for fleet management.
• Diversification of supply chains: Most shippers have found it imperative to create more resilient supply chains since the pandemic turned existing standard practices on their head. Combining investments in technology with creativity and flexibility, most supply chains will diversify further throughout 2024 to cover any potential disruptions that may come up.
• Freight Rates Climbing: There’s an emerging view from experts that freight rates could see an upward trend into Q2 and next summer. Oil prices are extremely volatile, so even with the World Bank forecasting an average cost per barrel of $81 in 2024, it remains to be seen how macro factors will affect fuel costs as the year goes on. We expect rates to continue to come up as the demand increases and supply, especially in Mexico, is not as elastic as a perfectly competitive market with free entry and exit would suggest.
• Election year to drive new U.S.-MX relationship dynamics: As always, elections create ripples on macroeconomic trends, and relationships between different countries can shift depending on the outcomes. As John Murphy the U.S. Chamber of Commerce Senior Vice President and Head of International, states “There’s probably no country [Mexico] in the world where there’s more untapped potential for closer business partnerships.” Elections coming up in 2024, both in the U.S. and Mexico, could play an important role in the market’s behavior, potentially impacting investments, as well as trade and geopolitical dynamics.
2024 Key Trends
Nuvocargo’s take:
We expect 2024 to be a year of expansion and consolidation. We're already experiencing a significant influx of shippers and manufacturers looking to relocate or expand their manufacturing, distribution, operations, and warehousing to Mexico. For us, this has translated into an opportunity to help companies take their first steps into U.S.-MX and act as a key ally to set up everything – freight, customs, insurance – for them for added simplicity end-to-end. At the same time, our US customers are expanding their networks in Mexico and are planning to ship more to and out of Mexico than they did in 2023. Similarly, we’re seeing Mexican shippers rapidly expanding their customer base in the US.
2023 saw Mexico solidify its position as the United States’ largest trading partner, which is something that we expect will continue for many years to come, especially as much of the 400+ nearshoring investments and expansions announced continue to materialize.
