U.S. rail and trucking companies are making big investments on both sides of the border with Mexico to capitalize on booming trade between the two countries. Every day, about 10 Kansas City Southern trains crisscross the border at Laredo, Texas, hauling everything from cars to chemicals – up from about six trains just three years ago.
The fourth-largest U.S. publicly traded railroad is leading the charge to take advantage of the swelling freight traffic between the countries as manufacturing booms south of the border because of the rising costs of goods from China and other exporters.
Over the past five years, Kansas City Southern has spent about $300 million to lay roughly 90 miles of new track in Texas, buy and update terminals in Mexico and make other network upgrades. The railroad company now generates one-quarter of its revenue moving parts and finished goods across the border.
Union Pacific Corp (UNP.N), the No. 1 U.S. railroad company, owns a 26 percent stake in Mexican railway company Ferromex.
Like rivals CSX Corp (CSX.N) and Norfolk Southern Corp (NSC.N), Union Pacific is partnering with Kansas City Southern to haul carloads in the United States to locations not served by the railroad.
As the U.S. economy creaks along, the growing business with Mexico is a cause for cheer: Both Kansas City Southern and Union Pacific are reporting much bigger increases in cross-border shipments than in overall volume.
Two areas that are “just exploding” are transporting automobiles into the United States and intermodal shipping – moving goods in containers that are shifted from truck to train or train to ship – said William Galligan, vice president of investor relations at Kansas City Southern.
The Kansas City, Missouri-based company, which took full ownership of a Mexican railroad now known as Kansas City Southern de Mexico in 2005, has built the first intermodal network between the countries.
Kansas City Southern, which started investing in the Mexican rail company a decade earlier, was betting the North American Free Trade Agreement would significantly alter shipping.
Total cross-border freight by train and truck has surged nearly 35 percent in the past five years, according to U.S. government data. At $291 billion through September, the volume of goods crossing the border this year is set to top $352 billion in 2011 and $308 billion in 2010.
The Mexican automobile industry’s double-digit production and export growth has boosted transportation needs.