LAGUNA BEACH, Calif. – The looming dockworker strike on the U.S. East and Gulf Coasts could turn into a long-term opportunity for Canadian Pacific Kansas City to develop the Mexican port of Lazaro Cardenas into an alternate gateway to Texas, CEO Keith Creel says.
The International Longshoremen’s Association says its 45,000 workers will walk off the job on Oct. 1 if the union does not reach a contract agreement with the United States Maritime Alliance, which covers ports from Maine to Texas.
In recent years, importers have sought to diversify their supply chains in order to avoid labor disruptions at ports on the U.S. and Canadian West Coasts. Now strike fears at East Coast ports have prompted shippers to return volume to the U.S. West Coast.
But they’re also more willing to consider Lazaro, a modern terminal on Mexico’s west coast that’s running at half of its annual capacity, as a way to get imported goods to Texas, Creel told an investor conference today.
“We’ve had much more interest from the Costcos of the world, the Home Depots of the world, the Toyotas of the world – big players that move products that have to get to shelves or to automotive facilities – that have test moves on the water now to Lazaro to feed Texas markets, which may have been fed East Coast or may have been fed West Coast,” Creel says.
Lazaro almost exclusively serves Mexican markets, but CPKC aims to develop the port into a niche player that can be an alternative to Los Angeles and Long Beach, Calif., and the Port of Houston.
The potential disruption of East and Gulf Coast ports has prompted shippers to try test moves via CPKC to its terminals in Kendleton, on the outskirts of Houston, and Wylie, in the Dallas-Fort Worth area.
CPKC’s cross-border service is reliable, Creel says, and he predicts that the test moves will sell shIppers on the concept of Lazaro as an alternative port.
“It’s going to be much like what happened … at Prince Rupert,” Creel says of the way Canadian National made the British Columbia port a gateway for containers bound to Canada and the U.S. Midwest.
Ultimately U.S. East and Gulf Coast ports will do well serving Texas markets, as will Los Angeles and Long Beach, Creel says. But there’s room for Lazaro, and Creel says CPKC will prove naysayers wrong.
“We’re going to be able to carve out our little niche that’s going to be extremely valuable for the shipper and valuable for the railroad,” he says.
CPKC’s second bridge over the Rio Grande at Laredo, Texas, is on schedule for completion by the end of the year, Creel says, which will double capacity at the top rail gateway with Mexico.
Elsewhere in Mexico, CPKC is spending $75 million to remove bottlenecks that have slowed trains at a half-dozen congested areas. The projects – including bypass tracks, new yard leads, and faster turnouts – were not initially envisioned as part of the CP-KCS merger. They’ll be completed by the end of the year, Creel says, and will speed up CPKC’s Mexican network.
Creel met with Mexico’s interior secretary six weeks ago to present the railway’s plan for developing passenger service in the Mexico City-Nuevo Laredo corridor. The plan involves adding a third track north of Mexico City dedicated to passenger traffic.
Last year, in response to a request from the Mexican government, CPKC agreed to fund a third-party study of what capacity improvements would be required to support passenger service while protecting freight capacity.
Creel spoke at the Morgan Stanley 12th Annual Laguna Conference.
The 2nd bridge at Laredo will benefit both KCS and UP. However, the additional traffic will probably highlight locations in both Mexico and USA that will become traffic bottlenecks.
I don’t know how much of a “boost” CPKC will get but kudos to them for making it happen. Wish ‘em luck.