CPKC woos Asian shippers with USMCA rail freight coverage

Newly merged Canadian Pacific Kansas City Railroad (CPKC) is marketing its new status as the only Class I railway spanning all three USMCA nations to Asian shippers – just as labour disruptions on the west coast are casting doubts over the fastest transpacific route.

The Mexican port of Lázaro Cárdenas offers "a safe alternative route that is considerably faster" than sending cargo through the Panama Canal to US gateways on the east and Gulf coasts, claimed Corey Heinz, its MD Asia Pacific.

The merger of CP and KC set off a race for intermodal reach into Mexico. On 11 May, after less than a month, CPKC started an intermodal service to link Chicago with San Luis Potosí in central Mexico, via Kansas, Texas and Monterrey, after striking partnership deals with intermodal heavyweights Schneider National and Knight-Swift.

Rivals Union Pacific and Canadian National teamed up with Mexican operator GMXT to mount a competing service that connects all CN points in Canada and Detroit with GMXT's terminals in Mexico, combining GMXT's service from Mexican points to the Texas border, UP's route from Texas to Chicago and CN's operations from Chicago into Canada.

But Mr Heinz noted that this offering involves transits between three parties, whereas CPCK offers a single-line, single-operator service.

And CPKC has access to seven gateways for ocean traffic: Vancouver, Montreal and St John in Canada; New Orleans in the US; and Lázaro Cárdenas, Veracruz and Altamira in Mexico. Of these, Vancouver and Lázaro Cárdenas on the Pacific are the most pertinent for traffic between Asia and the USMCA region.

According to Mr Heinz, CP has the shortest route map from Vancouver to the US midwest, with four days transit to Chicago and direct access to Kansas City and Minneapolis. But he is more excited about the potential of Lázaro Cárdenas, which he regards as a potential game-changer.

As Mexico's second-largest port, it has two container terminals, with a combined capacity of 3.2m teu, with on-dock rail access and ample room to grow. The larger terminal is only about 50% used at this point, he said.

Routing traffic from Asia to Dallas over the Mexican Pacific gateway takes 16 days on the water and four on the rail, which is at least 7-10 days faster than going through the Panama Canal and calling at Houston, Mr Heinz said. Rail times to Kansas City and Chicago are seven and eight days, respectively.

Moreover, ocean carriers have recently introduced weight restrictions and surcharges in response to reduced draught in the canal owing to low water levels.

The recent disruptions at US west coast ports and the possibility of a strike at the port of Vancouver could add momentum to the rising interest in the Lázaro Cárdenas route from Asia, added Mr Heinz. If work stoppages were to happen, top management at CPKC has given the green light to route more cargo via Mexico.

Asian shippers and 3PLs have shown lively interest in the possibilities of CPKC. Currently many of CP's Asian customers are shipping cargo to Mexican points like Querétaro, from where they are trucked to factories in the US and Canada. Direct train service from Mexico to Chicago with connections to Toronto and Montreal offers cost savings, safe transits and lower carbon footprint, claimed Mr Heinz.

CPKC has a sizeable customer base in Asia. According to Mr Heinz, traffic to and from Asia accounts for revenue of about $2bn a year – business that was on the strength of CP's network. With the Mexican component and the single-line USMCA coverage, this looks set to grow – especially if the west coast and Panama Canal routings experience further upsets.