Railroads seek to head off Mexican bridge closures as cross-border traffic grows

OMAHA, Neb. — Railroad executives will meet with U.S. and Mexican customs officials next month to discuss how they can work together to keep vital rail border crossings open amid the surge in migrants crossing the Rio Grande.

The railroad bridges linking Eagle Pass and El Paso, Texas, with Mexico were shut down for four days last month as U.S. Customs and Border Protection diverted personnel to help process migrants who entered the U.S. illegally.

The shutdown of the second and third busiest Mexico rail gateways — which handle a combined 24 Union Pacific and BNSF Railway trains per day — threw a kink into supply chains as freight stacked up on both sides of the border. Nearly 10,000 rail shipments were delayed, with UP estimating that the closures cost $200 million per day in goods, lost wages, and transportation costs.

“We’re all getting together with customs in February to work through the process of how we have to work together. … The real point is trying to stay open,” Union Pacific CEO Jim Vena said in an interview today. “At the end of the day, the railroad is not the issue. People are not coming across on the trains.”

So officials from UP, Ferromex, BNSF Railway, and Canadian Pacific Kansas City will meet with customs to try to prevent another round of closures. “That was a long time to be shut down,” Vena says. The Eagle Pass bridge also was shut down in September when Ferromex halted northbound traffic due to migrants riding trains to the border.

The UP chief has met with senators, representatives, and Biden administration officials to emphasize the importance of Eagle Pass and El Paso, which handle 45% of the railroad’s cross-border volume. And Vena praised customers for their lobbying efforts in Washington.

Some customers, he says, have slack in their supply chains and can stick with the railroad. But others must divert shipments to trucks, which were unaffected by the border bridge closures. Customers say they had no choice but to shift freight to the highway despite the higher costs and increased greenhouse gas emissions, Vena says.

“That’s what Congress needs to understand,” he says.

Among the traffic UP handles at Eagle Pass: Exports of barley, rice, malt, hops, and glass bound for the massive Constellation Brands brewery at Nava, Mexico, and northbound boxcar loads of cases of beer such as Modelo and Corona. “You don’t want to be short of Corona for the Super Bowl,” Vena quipped.

UP sees further growth in cross-border traffic

Mexico was a hot topic on UP’s earnings call this morning. Analysts asked about growth potential as manufacturers shift operations from Asia to Mexico — as well as the potential impact of the rail border closures.

“Nearshoring is real,” says Kenny Rocker, UP’s executive vice president of marketing and sales, citing the billions of dollars worth of investment companies made or announced last year for new plants in Mexico. Many of the planned projects are industrial, with rail-centric supply chains, he says.

UP is currently seeing growth in automotive and intermodal shipments, Rocker says, including the Falcon Premium intermodal service run with Canadian National and Ferromex, as well as new service UP launched in the fall between Mexico and the U.S. Southeast via interchange with Norfolk Southern or CSX via Memphis.

“We’ve got a service product coming out of Mexico that is unmatched. It’s a daily product, it’s the fastest product getting in and out of the heart of Mexico,” Rocker says.

UP will be able to win more Mexico volume due to its 26% stake in Ferromex as well as the options customers have by being able to route traffic via six UP-served Mexico gateways, executives say.

UP and Ferromex work like one railroad, Vena says, adding that he’s confident Ferromex will make capacity improvements when necessary.

“I’m disappointed that the border was shut down and I do not think that’s the way to move forward,” Vena told investors and analysts on the railroad’s earnings call this morning. “There is a problem, the humanitarian issue. … It’s very difficult when you see people crossing the river, and a mother with a child coming and then falling into some razor wire. That is not something anybody should see. But at the end of the day, for us, I think it’s more important that the border crossings are fluid. And we are doing everything … to make sure we protect the railway crossings, that we do not have people crossing on the trains. And we’ve done a really good job.”

The Mexican government in November asked freight railroads to cooperate on the development of seven passenger routes. Passenger and freight operations should be able to coexist in Mexico, Vena says, and should not have an impact on Ferromex.