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Borderlands: Mexican Factories Feel Coronavirus Effect; Mexico Defends Law Criticized By Truck Manufacturers

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Borderlands: Mexican Factories Feel Coronavirus Effect; Mexico Defends Law Criticized By Truck Manufacturers

Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: factories in Mexico feeling effect from coronavirus; Mexico seeks solution to controversial fuel standard; traffic congestion costs the trucking industry $75 billion annually; and metal recycling firm to build new plant near U.S.-Mexico border.

Factories In Mexico Feeling Effect From Coronavirus

Factories across Mexico have begun to feel disruptions in their supply chains caused by the coronavirus.

The coronavirus has already wreaked havoc in China. Now, Mexican auto parts and electronics factories that depend on materials from China have been affected as well, said industry experts.

"We have started to have some adjustments in our supply scheme because of this unfortunate situation, due to the widespread shutdown of operations of plants in China," Luis Aguirre Lang, president of Mexico's National Council of the Maquiladora Industry and Manufacturing Export (INDEX) said in news outlet Reforma.

Factories stretching from Ciudad Juarez to Chihuahua, Sonorra, San Luis Potosi and other locales have had to modify their production schedules due to the delay of imports from China.

Factories in the state of Chihuahua have experienced slower production, according to Federico Baeza, local chapter president of Employers' Confederation of the Mexican Republic.

There are more than 500 factories throughout the state of Chihuahua — which borders Texas and New Mexico and includes the city of Juarez across the border from El Paso.

Factories across Chihuahua employ almost 400,000 people, according to INDEX Juarez. Companies with factories in Chihuahua include Fokker Aerospace, Alt Technologies, Aerospace Atlas and Foxconn.

Mexico's Office for Economic Affairs published a report showing that the main products or materials imported by Mexico from China in 2019 included modular circuits used in computers and other machines ($3.8 billion), cell phones ($3.6 billion), medical machine parts and supplies ($2.6 billion), optical instruments ($1.9 billion), and computers ($1.7 billion).

However, the bigger effect of the coronavirus on U.S.-Mexico trade isn't necessarily short-term manufacturing stoppages, according to Matt Silver, CEO and co-founder of Chicago-based Forager.

"[Stoppages] are happening, and we are seeing manufacturers who rely on Chinese parts feeling the strain, but that's mostly temporary," Silver told FreightWaves. "The real impact of the coronavirus is on the overall conversation around nearshoring. More and more industries are moving into Mexico."

Forager is a freight tech company focusing on freight from Mexico and Canada. The company recently published a blog post titled "Outbreak: What the Coronavirus Means for Domestic Supply Chains."

Silver said between increased tariffs on Chinese goods, the new United States-Mexico-Canada Agreement that encourages more North American manufacturing, and now the coronavirus, "there are a lot of compelling reasons for companies to reassess their supply chains."

Mexico's Transportation Industry Seeks Solution To Controversial Fuel Standard

Officials from the Mexican government met with representatives from the trucking industry to seek a solution to a controversial law forcing manufacturers to build vehicles that use ultra-low sulfur diesel.

During Thursday's meeting, officials announced plans to adjust the petroleum specifications through Mexico's state-owned PEMEX, with the aim of improving the distribution and availability of UBA.

As of Jan. 1, 2020, the legislation, known as NOM-044 from Mexico's Ministry of Environment and Natural Resources (SEMARNAT), forces manufacturers of heavy vehicles to build trucks that consume only ultra-low sulfur diesel.

"SEMARNAT recognizes that it is necessary to develop a plan in which the distribution of ultra-low sulfur diesel is carried out in a more strategic way, particularly in cities or areas where there are air quality problems," the agency said in a statement.

Officials in Mexico's trucking industry have said the ultra-low sulfur diesel supply wasn't available in up to 25% of the municipalities across the country. The shortage of ultra-low sulfur diesel limits the ability of truck manufacturers to switch to this type of fuel, industry professionals said.

"We ask SEMARNAT to work together on a solution to avoid the environmental crisis that lies ahead, and we adjust the standard to the country's energy reality," Miguel Elizalde, president of Mexico's Association of Bus and Truck Manufacturers (ANPACT), said in a statement.

Other transportation officials said the lack of ultra-low sulfur diesel will hurt the trucking industry if the government goes through with its plan because "Mexico lacks the guaranteed supply of ultra low sulfur diesel [indispensable for new engines]."

"As long as we do not have that condition, it is not fair to condemn Mexican transportation, that will not pay off," said Guillermo Rosales, deputy general director of the Mexican Association of Automotive Distributors (AMDA), during a press conference after the meeting with SEMARNAT.

Enrique González Muñoz, president of the National Chamber of Cargo Freight, (CANACAR), said the lack of UBA would hurt Mexico's cross-border trade.

However, SEMARNAT officials said NOM-044 "will allow a reduction of more than 95% of the main pollutants emitted by this type of vehicles [heavy], mainly nitrogen oxides (NOx) and PM2.5 particles."

"It is important that Mexico apply EPA 10 and EURO VI, in order to guarantee the human right of all people to enjoy a healthy and adequate environment for our development and well-being — to be up to our business partners in North America and the European Union, in terms of clean and efficient technologies" and "live up to its partners in North American trade and the European Union," the organization said in a statement.

Traffic Congestion Costs The Trucking Industry $75 Billion Annually

The American Transportation Research Institute (ATRI) has released its annual list highlighting the most congested bottlenecks for trucks in America, costing the trucking industry $74.5 billion annually and accounting for 1.2 billion lost hours of productivity.

ATRI, the research organization of trade group American Trucking Associations (ATA), released the report on Wednesday.

It shows the top 100 truck bottlenecks across the United States based on 2019 data, with Texas once again topping the list with 11 of the 100 worst bottleneck locations.

"Everything is bigger in Texas, including our congestion challenges," Texas Trucking Association President and CEO John D. Esparza said in a release.

Esparza added, "With a growing population, projected increases in economic activity as a result of the recently ratified United States-Mexico-Canada Agreement, and overall growth, we need to quickly tackle our infrastructure issues. Trucks play a critical role in our economy and if they're slowed down by congestion and poor roads, it impacts everyone from the shopkeeper to the shopper."

The worst traffic bottlenecks in Texas to make the list are No. 4 Houston: Interstate 45 and Interstate 69/US 59; No. 14 Houston: Interstate 10 at Interstate 45; No. 16 Austin: Interstate 35; No. 17 Houston: Interstate 45 at Interstate 610 (north); and No. 18 Dallas: Interstate 45 at Interstate 30.

The intersection of Interstate 95 and SR 4 in Fort Lee, New Jersey, is again the No. 1 freight bottleneck in the U.S., according to the report. The next worst include the intersection of Interstates 285 and 85 in Atlanta and Interstates 24 and 40 at Interstate 440 in Nashville, Tennessee.

Metal Recycling Firm To Build New Plant Near US-Mexico Border

Officials with W. Silver Recycling cited trade between Mexico and the United States as a factor in moving some of its operations to the border crossing near Santa Teresa, New Mexico.

W. Silver Recycling recently announced it will build a 120,000-square-foot facility and recycling processing plant. The business is expected to be operational this year, focusing on materials such as aluminum, copper and brass.

Lane Gaddy, CEO of W. Silver Recycling, said the location near the U.S.-Mexico border, as well as state incentives, were among the reasons for its decision to come to Santa Teresa, where it will process metals using magnets, machines, compaction and manual labor before sending the recycled materials to customers.

"This location offers us a great logistics advantage," Gaddy said in a statement. "The border crossing, the overweight cargo zone, and the rail and truck connections all make for an opportunity we are very excited about."

The company also has nearly a dozen locations in New Mexico, California and Texas, as well as in Monterrey, Mexico, and Mexico City.

Image Sourced from Pixabay

 

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