Cross-border 🇺🇸🇲🇽Market Update
January 2024, Vol. VI
Monthly cross-border updates curated with insights from our experts.
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The first month of the year has come and gone, bringing optimism to the logistics industry and a renewed outlook after the uncertainties of 2023. In this market update, we will cover various topics, starting with insights from Freightwaves and their Freight Sentiment Indexes, which indicate a burgeoning growth trend in the freight industry. Additionally, we'll explore new tax incentives introduced in Nuevo León, particularly within the border-adjacent municipalities of Anáhuac and Colombia. The update continues with expert advice from Mark Vickers on mitigating cargo thefts and looks at an upcoming nationwide strike in Mexico led by FEMATRAC. Finally, we’ll look at the outlook for autonomous trucks within Texas and the safety concerns that come with them.
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. 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
Freightwaves has been surveying shippers, brokers/3PLs, and carriers on industry-specific sentiments since Q4 2022. According to their most recent report from January 21st, the freight market seems well-positioned to bounce back throughout 2024.
Even though the fear of a looming recession lingered throughout 2023, freight demand remained strong. Overall, the Freight Sentiment Indexes achieved a record high of 13.58 in January 2024 compared to 9.79 from the previous Q.
Confidence and moods in the freight industry have surged recently due to the following factors:
• Inflation receding
• Retailer’s inventories are beginning to empty
• The government’s “big ticket” decisions (Inflation Reduction Act, CHIPs Act, Infrastructure Bill) and spending are working their way through the economy
• China’s economy is weakening, leading to lower commodity inflation
There’s little reason to think that moods will change for domestic freight, even with tensions rising internationally.
• In January, diesel prices dipped .766 cents per gallon on average nationwide compared to last year, according to the Energy Information Administration (EIA).
• Average outbound linehaul rates rose due to the extreme weather from Winter Storm Indigo, with rates increasing by $0.03/mile to a national average of $1.74/mile, still $0.10/mile lower than last year.
• Holiday shopping brought the Logistics Manager’s Index (LMI) to 50.6 in December, a rise of 1.2 points, with online retail being one of the top performers, an increase of 6.3% vs. 2022.
• According to the Bureau of Transportation Statistics, there was a 4.6% increase in the value of goods traded between the U.S. and Mexico in November 2023 compared to last year, a 6 month-long growth streak.
1The LMI score is a combination of eight unique components that make up the logistics industry, including: inventory levels and costs, warehousing capacity, utilization, and prices, and transportation capacity, utilization, and prices. The LMI is calculated using a diffusion index, in which any reading above 50.0 indicates that logistics is expanding; a reading below 50.0 is indicative of a shrinking logistics industry.
Nuevo León has been the most active state in Mexico around nearshoring, securing opportunities and investments, bolstering their existing infrastructure to cover increasing demand, and more. Infrastructure has also been on their list, with the expansion of the Colombia bridge and the La Gloria-Colombia highway, which saw a 12% increase in vehicle crossings from Mexico to the US in 2023 vs. 2022. This time, the Nuevo León government has announced tax incentives for companies that want to settle within the municipalities of Anáhuac and Puerto Colombia, located near the border with the United States.
The new incentives will cover the following:
• 0% VAT (Value added tax)
• 0% ISR (Income Tax)
• Discounted ISN (Payroll Tax)
• Discounted Property Tax
• Faster and more digitized procedures for investors wanting to settle in these municipalities.
The only caveat? These incentives will apply only to the projects that generate at least 100 jobs within the municipalities.
As more opportunities materialize in the following years, other states might take some of the steps Nuevo LeĂłn has taken to stay competitive in the nearshoring landscape.
Facts and Figures
Nearshoring Beat
Expert's Take
With the increased volume of cross-border shipments, cargo safety has also become a growing concern. This month, we sat down with Mark Vickers, EVP & Head of International Logistics at Reliance Partners, who highlighted an increasing awareness of the need for robust insurance solutions among shippers within Mexico.
Cargo theft in Mexico has been rising for most of last year and into 2024. According to Reliance Partners’s Mexico Cargo Hijacking Data Portal, 6,030 loads were hijacked from January 2023 to September 2023, an 8% increase from the same period in 2022; this comes in stark comparison with around 2,600+ events (220 per month) of cargo theft reported in the US throughout all of 2023.
“25-30% of shippers were adding cargo insurance to their logistics costs last year”, said Vickers, a big step up from the 5% average that was the norm before 2023.
Read his take on how to mitigate this issue here.
In Texas, 2024 marks a significant shift in the trucking industry as companies like Aurora Innovation, Kodiak Robotics, and Gatik AI plan to introduce driverless trucks without human co-pilots. While the Texas Department of Transportation views this as a safety and economic advancement, concerns arise from groups like Advocates for Highway and Auto Safety about regulatory and data transparency issues.
Despite a record of no at-fault incidents in tests, debates continue over the safety and efficiency of replacing human drivers with autonomous trucks, backed by an FMCSA report that shows that nearly two-thirds of fatal accidents occur when a person, object, animal, or other vehicle veers into a truck’s lane.
We expect continued discussion on this topic and its impact on the industry throughout the year.
Innovation Hub
Editors Picks
• Cross-border freight on the rise
by Freight Caviar
• Trade is a function of geography
by Nascent.
• The future of U.S. Mexico trade: Trends and Insights for 2024
by Nuvocargo.
Even though there are longstanding issues with existing capacity, the prevailing sentiment around the market is that the recalibration that was the norm through 2023 will stabilize and grow throughout this year.
Carrier Spotlight
The Mexican Federation of Transportation and Freight Transport (FEMATRAC) has called for a strike on February 5 in response to increasing insecurity in the country's freight transportation sector. The strike, affecting major highways like the Mexico-Queretaro route, highlights the industry's struggle with rampant cargo theft, which has seen a significant rise in recent years.
FEMATRAC's president, Lauro Rincón Hernández, criticizes the lack of effective dialogue with the National Guard and other authorities, worsening security issues. The coalition, consisting of various organizations including carriers and drivers, demands:
• Disruptive change in security strategy
• Removal of personnel not delivering results
• Secure rest areas
• Keeping highways and tolls in optimal condition
• Free towing services
• Video surveillance of critical points on highways
This strike represents a major stand by the transportation sector with consequences yet to be seen.
