Kansas City Southern CEO expects trends to boost manufacturing in Mexico

Railroad in position to benefit if moves continue toward shorter supply chains
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KCS_Mexico_Bridge
In a view looking from Mexico toward the U.S., an artist’s rendering shows the proposed new span Kansas City Southern will build across the Rio Grande at Laredo, Texas, just downstream from its existing International Railway Bridge.
Kansas City Southern

PITTSBURGH, Pa. — Kansas City Southern will benefit from growth in manufacturing in Mexico, particularly if the pandemic accelerates trends toward less reliance on China and supply chains that are shorter and less at risk to disruptions, CEO Pat Ottensmeyer says.

The implementation of the USMCA trade pact in July adds certainty to North American commerce for the first time since 2016, Ottensmeyer told the North East Association of Rail Shippers conference on Wednesday.

For the past decade Mexico has been gaining manufacturing as companies shifted operations to lower-cost countries outside of China. 

“The confluence of these events presents a unique opportunity for North America to emerge as an even more powerful force in global manufacturing and trade,” Ottensmeyer says.

And that’s good news for KCS. The railroad’s fastest-growing segment is cross-border traffic, which now total about 40% of the railway’s volume when Union Pacific interchange at the Laredo, Texas, gateway is included.

Two of the top three cross-border growth opportunities – petroleum products from Gulf Coast refineries and grain grown in the Midwest – are exports from the U.S. to Mexico, Ottensmeyer notes.

KCS remains optimistic that double-digit percentage growth in cross border traffic will continue, particularly as shipments of gasoline and other refined products are expected to surge as more storage tanks and terminals are built in Mexico.

And that’s why KCS is proceeding with plans to build a second span over the Rio Grande at Laredo to effectively double capacity at what is already North America’s busiest rail border crossing. 

Ottensmeyer, who unveiled an artist’s rendering of the proposed bridge to be built alongside the existing single-track International Railway Bridge, says the railway hopes to complete the project within three years.

Like other capacity expansion projects, the bridge is not being built on speculative growth. Rather, Ottensmeyer says, capacity projects are being done in concert with customer forecasts.
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