Newly merged Canadian Pacific Kansas City Railroad (CPKC) is hyping the Port of Lazaro Cardenas in Mexico as an alternative gateway to North America for Asian shippers amid labour issues on the West Coast and the Panama Canal’s recent move to reduce daily vessel transits in the major waterway.

Corey Heinz, managing director of sales for CPKC, said the Class I railway – which resulted from the merger of Canadian Pacific Railway (CP) and Kansas City Southern (KCS) in April this year – is the only railroad connecting the U.S., Canada, and Mexico on a single line network, which he said presents “tremendous opportunities” for shippers in Asia looking to reach the U.S. and Canada markets.

In a media briefing, the CPKC executive noted that the Port of Lazaro Cardenas offers shorter transit time and fewer restrictions while allowing shippers to avoid disruptions from potential labour actions and ultimately promoting cost efficiency as density builds in Mexico’s second-largest port.

“As we go a little further south, this is really where we start to see a potential game-changer: Port of Lazaro Cardenas – a Mexico-specific gateway, and I would call the newest gateway,” Heinz said, explaining that as CP has taken ownership of KCS, there is no longer a need to interchange between networks.

“We have created single line optionality from Mexico all the way up through to Chicago and then our ability to switch containers to CPKC to go even all the way to Canada,” he added.

Heinz noted that the Port of Lazaro Cardenas has two container terminals with on-dock rail access and room for expansion. The larger terminal is currently only 50% utilized, and they have a capacity of 3.2 million TEUs.

“With Lazaro, we are allowing an opportunity to start to develop what we’ve nicknamed the Texas shortcut. What that is, is that as you come out of Asia, instead of coming and going down to the Canal, and then up into Houston, you have the opportunity to bring your vessels directly to Lazaro, cutting a week to a week-and-a-half of transit and cost and discharge it all on Lazaro and run it up into the Houston-Dallas-Kansas City-Chicago markets,” Heinz said.

With CPKC’s interchange agreements with other Class Is, he added that this would also allow the rail network to go ahead and interchange to reach deeper into the markets of the Ohio Valley or even into the Southeast.

Heinz said this alternative gateway is even more critical amid labour issues on the North American West Coast and the recently announced reduction in maximum daily transits at the Panama Canal.

“Everybody always talks about options, [and] Lazaro is addressing it,” he said. “From the labour lens, it really is an option: you’ve got the bandwidth, space to get into Lazaro, and train service that could get you into the U.S. It gets you to Chicago; it can get you to interchange to other sides, other tractions, to other parts of the country. We can get you up to Canada, so with that said, there is some workaround from a labour perspective,” Heinz added.

“We know that Lazaro cannot absorb all of L.A. and Long Beach and the whole of the West Coast tomorrow, but it can play a role in helping ameliorate some of the pain if there is a significant labour issue.”

From a transit point of view, using the Port of Lazaro Cardenas also becomes even more compelling when considering cargo that goes through the Panama Canal. Heinz pointed out that with current drought restrictions in the waterway, vessels cannot move as much cargo, so the carriers are taking on more cost.

“Down the road, there are opportunities to maybe forego going into the [Panama] Canal and getting into Houston, and coming direct into Lazaro in a shuttle type service. You can avoid the congestion on the Canal, you can cut your transit times down, and you can still reach your local market of Houston, and you can still reach all the rail networks that you would have gotten into had you come up through Houston,” Heinz said.

The CPKC executive said in response to a question from Asia Cargo News that “transit savings at a minimum is going to be 7-10 days right out of the gate.”

“So from an Asia [shipper perspective], they know that if they’ve got a stable network and they just run a ship to Lazaro, and it gets on the rail right away, they don’t have to worry about going through the Canal and their cargo is going to get there more quickly.”

As the ocean carriers start to put their head around that a little bit, there will be a better cost-structure investment, and cost efficiency will take shape, he said. “I can almost look at a shuttle service out of Asia, coming right into Lazaro, doing a big dump and then turning it over to CPKC to come up into the States.”

Heinz noted how the COVID-19 pandemic had shippers prioritizing transit, moving products with fluidity, and having “options on the table.”

“CPKC actually, becomes the only railroad in North America that could still service the country and not call or not have a vessel even call in Canada or the U.S., so we could still continue to serve the shipping community even if there is a labour issue that is significant and has a material impact,” he added.

Heinz clarified that the Port of Lazaro Cardenas transit is also safe, pointing to CPKC’s considerable investments to secure goods moving through its Mexico network.

“We have spent an enormous amount of money making sure that the Mexico transit is safe,” Heinz told the briefing, adding that the operator has over 1,000 security officers on the network, drones, K9 inspections, a huge security centre, and a third party that manages, monitors and reports the company’s KPIs.

“You could see that the amount of effort is there, and as a result, we’ve had a very successful, very secure Lazaro gateway,” Heinz said. “Our claims rate is 99.98% of more moves without a claim, which is on par if not better than any gateway in North America.”

Heinz said the feedback from the Asian shipping community has been nothing but positive.

“It’s blown me away at the amount of opportunity and interest coming from the shipping community,” Heinz said. “It’s been challenging for us because we’ve got to have all the stakeholders caught up.”

Heinz noted that the railroad’s goal isn’t to run a train to San Luis Potosi and then connect it to that 181 coming out of Mexico City. It is to depart a direct train from Lazaro on a straight shot to Chicago with a cut in Houston, Dallas, Kansas City, Chicago – and be at Chicago in 6 days.”

CPKC — which has over 20,000 miles of tracks across the USMCA countries — noted that the Asia region is a significant part of its operations.

Heinz said that the amount of revenue that starts in Asia or ends up in Asia that comes on to the CPKC rail network at some point is north of US$2 billion a year.

By Charlee C. Delavin

Asia Cargo News | Hong Kong