Borderlands: Soaring Diesel Prices Affect Import Rates Between US and Mexico
Borderlands is a weekly summary of developments in the world of trucking and cross-border trade between the United States and Mexico. This week: soaring diesel prices could affect import rates between the United States and Mexico; South Texas College partners with carrier to offer CDL training; Logistics Plus opens 542,000 square foot warehouse in Arizona; and Mexican tequila exports soared 32% in the first four months of 2022.
Soaring diesel prices affect import rates between the United States and Mexico
The price of diesel fuel hit a record high in the United States on Thursday at $5.55 a gallon, up nearly 20 cents from just a week ago and 51 cents above oil prices. ‘april.
As carriers and owner-operators across the United States struggle to keep up with rising prices, the cost of diesel is also affecting freight rates as well as trucking capacity in Mexico.
Rising diesel prices have already caused some of the largest trucking companies in Mexico to increase their rates by 3% to 5%, according to Maria Teresa Torres, pricing and purchasing manager for Nuvocargo, a digital logistics platform based in New York for cross-border trade. between the United States and Mexico.
“Diesel is one of the largest components of any inland freight rate as it makes up around 30% of the total price,” said Teresa Torres. “Increased fuel prices are an expense carriers must pay prior to shipping.”
She said import rates between the United States and Mexico aren’t as low as they used to be because capacity is limited for cross-border freight.
“Tariffs to the south are increasing and approaching export costs,” said Teresa Torres. “We are currently facing a significant increase in import rates, not only due to the increase in fuel prices, but mainly due to limited capacity and shortage of drivers.”
Other factors that influence the increase in freight rates are market-based exchanges, wait times, delays and dwells, which also indirectly affect rates.
It is unclear whether diesel prices are currently affecting US-Mexico trade. The cross-border market in Laredo, Texas is currently the country’s number one port of entry for Mexican imports, dealing with everything from vehicles, auto parts, and fresh and frozen goods to household goods, machinery and equipment. electronic.
FreightWaves’ Outbound Tender Volume Index — which shows which markets are experiencing prolonged volume growth or contraction — shows Laredo’s volumes have fallen about 6% since Monday.
In Mexico, approximately 80% of fleets are small trucking companies or owner-operators. Mexico imports 80% of its fuel from the United States, but gasoline and diesel cost less in Mexico because the Mexican government provides subsidies to the trucking industry to offset operating expenses.
Last year in Mexico, diesel prices were around $4 a gallon. On Friday, diesel fuel in Mexico was about $4.31 a gallon.
“Although the increase is not as great as in the United States since the Mexican government has subsidized most [diesel fuel]it is always detrimental, because it implies an increase in tariffs, as well as other operational problems, ”said Teresa Torres.
Applying fuel surcharges to freight rates is not yet common practice in Mexico and could catch cross-border shippers off guard.
“A decisive factor in attracting customers is the reduction in prices and the length of time they can be maintained,” said Teresa Torres. “Although fuel surcharges are to be applied in Mexico, price uncertainty is a major concern for shippers. Indeed, due to the increase in the price of fuel, there is a direct impact on the final price for consumers. Fuel surcharges (instead of fixed rates) help avoid financial losses for parties involved in the supply chain. »
South Texas College partners with carrier to offer CDL training
South Texas College (STC) based in McAllen, Texas, has announced that it is partnering with a cross-border carrier to offer a CDL program.
The program is a partnership between the college and Trancasa, which operates a fleet of 700 trucks, including 450 in Mexico and 250 in the United States. Trancasa is based near Pharr, Texas.
The program will adhere to new novice driver training regulations set by the Federal Motor Carrier Safety Administration, officials said.
“We know there is an urgent need for truck drivers, and we are planning a very robust program where students can get their CDL…and get them on the road as soon as possible,” Ricardo J. Solis, president of South Texas College said in a statement.
The CDL course will consist of 200 hours of instruction over five weeks: 40 hours of classroom and computer lab instruction as well as 160 hours of observation and driving on a practice range and on public roads.
The program is expected to begin in the fall semester.
Logistics Plus, based in Erie, Pennsylvania, recently opened a 542,000 square foot warehouse in Phoenix, aimed at providing supply chain efficiencies for West Coast imports and exports.
“Part of the facility will be immediately filled with customers from our growing solar and technology sectors,” Tom Kelly, who will oversee warehouse operations, said in a statement.
The facility is Logistics Plus’ second largest commercial warehouse. Logistics Plus manages over 2 million square feet of warehouse space in more than a dozen facilities across the country.
Mexican tequila exports soar 32% in the first four months of 2022
Mexican producers exported 126 million liters (33 million gallons) of tequila from January to April, a 32.1% increase from the first four months of 2021, according to data from the Tequila Regulatory Council (CRT) based in Jalisco, Mexico.
The United States remains the top importer of Mexican tequila, accounting for 83% of sales in the first quarter. The United States imported 104.9 million liters of tequila, a 27% year-over-year increase from the same period in 2021.
The other main importers of Mexican tequila in the first four months of the year are Germany, Spain, Colombia and Latvia.
Over the past two years, Mexican tequila exports have increased by almost 50%, from an annual production of 351.7 million liters in 2019 to 527 million liters in 2021, according to the CRT.
Watch: FreightWaves Shipper Update Week in Review.
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