KCSdeM and Port of Lazaro Cardenas

Discussion related to the past and present operations of Kansas City Southern Lines, including affiliates Texas Mexican Railway, Grupo Transportation Ferroviaria Mexicana (TFM), and Panama Canal Railway Co. Official web site can be found here: KCSOUTHERN.COM.

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KCSdeM and Port of Lazaro Cardenas

Postby Gilbert B Norman » Sun Feb 05, 2012 5:11 pm

I was of impression that a factor in KCS's "bet" on the Mexican rail system (former NdeM lines), was to develop the Port of Lazaro Cardenas so that for maritime operators would find such, and of course a line haul over KCS lines, to be competitive with landing at a West Coast US Port such as Los Angeles (and a line haul over BNSF or UP). However, it wouold appear that post-PANAMAX, as well as the political and social instability confronting Mexico today, could put a "damper' on that strategy. I would presume that KCS envisioned other sources of X-Border traffic to justify the investment, as for those reasons it would appear Lazaro Cardenas is a "no-start" for other than internal traffic.

Discussion, anyone? - especially our Members here versed on maritime affairs.

disclaimer: author holds long position KSU
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Re: KCSdeM and Port of Lazaro Cardenas

Postby Cowford » Sun Feb 05, 2012 10:01 pm

Mr Norman, there may be shortcomings to US import traffic expectations (not sure what those expectations were) but they are most likely being offset by Mexico's impressive home-grown development. Drug trafficking-related violence remains a very serious concern, but it doesn't seem to be dampening enthusiasm for continued foreign investment in Mexico's manufacturing base. The fact that the China-Mexico wage gap is closing and Mexico's juxtaposition with the US certainly helps... especially with the prospect of continued high bunker fuel prices.

APM terminals recently signed a concession at LC. LC has unfettered expansion possibilities, 54'+ draft, good rail access... lots of potential!
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Re: KCSdeM and Port of Lazaro Cardenas

Postby Gilbert B Norman » Sun Feb 05, 2012 10:19 pm

Zees eez great propaganda; Komarades--

http://www.youtube.com/watch?v=mISIRKVn7UQ

Nevertheless, a convenient overview of Lazaro Cardenas.

To continue with other thoughts regarding rail, on one hand KCSdeM need not be concerned with other rail "competition" - something that both BNSF and UP must think about at LA/LB - namely from each other. But then, I'm not sure to what extent maritime operators (defer to you Mr. Cowford) are concerned about having only one railroad available.

Finally, admittedly off topic, but maybe analogous to the development of Lazaro Cardenas, I have long held that the Port of Seattle would handle more Asian ex/im traffic if two competitive rail routings were available (yes; I know the UP makes rates, but is any of their routes out of Seattle exactly what one would call "competitive" for an East-West line haul; BNSF only "sort of" for an N-S through Bieber); just one more argument (it's off-topic here) that MILW Lines West should have remained in place; albeit not likely operated by the MILW or successor.
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Re: KCSdeM and Port of Lazaro Cardenas

Postby JayBee » Tue Feb 07, 2012 12:44 am

Gilbert B Norman wrote:Zees eez great propaganda; Komarades--

http://www.youtube.com/watch?v=mISIRKVn7UQ

Nevertheless, a convenient overview of Lazaro Cardenas.

To continue with other thoughts regarding rail, on one hand KCSdeM need not be concerned with other rail "competition" - something that both BNSF and UP must think about at LA/LB - namely from each other. But then, I'm not sure to what extent maritime operators (defer to you Mr. Cowford) are concerned about having only one railroad available.

Finally, admittedly off topic, but maybe analogous to the development of Lazaro Cardenas, I have long held that the Port of Seattle would handle more Asian ex/im traffic if two competitive rail routings were available (yes; I know the UP makes rates, but is any of their routes out of Seattle exactly what one would call "competitive" for an East-West line haul; BNSF only "sort of" for an N-S through Bieber); just one more argument (it's off-topic here) that MILW Lines West should have remained in place; albeit not likely operated by the MILW or successor.


IMHO Lazaro Cardenas will be the big West Coast Port for Mexico Traffic, which is growing very nicely.

As for why Seattle struggles behind LA/LB;

1) LOSSAN (Los Angeles/San Diego) is the second largest conurbation in the US by population, so a significant amount of traffic is naturally destined for the area.
2) The largest retailers (Walmart, Target, Best Buy, etc.) have Import Distribution warehouses in the Greater LA Basin where Import containers are stripped out, sorted, and restuffed into Domestic containers for their Regional Distribution Centers. Arriving Maritime containers will typically have either just one product or a limited amount of different products from a single manufacturer. The Departing Domestic containers will have a variety of products sorted and restuffed from many Maritime Boxes.
3) Domestic 53' Containers have ~40% more cubic capacity than Hy-Cube Maritime 40' containers. 45' Maritime containers are expensive. Most products shipped by Mass market Retailers Cube out.
4) Containerships are only making money when they are sailing, not when they are docked. This effect is amplified by the size of the ship. Therefor those Ports with cranes capable of the fastest unloading and reloading will get preference, and the Shipping lines will limit the number of Ports served to as few as possible. Ideally just one port, but in practice two.
5) The railroads charge the Steamship lines a per container fee for any traffic lanes where inbound and outbound traffic is out of balance by more than a very small percentage.
This only applies to traffic managed by the Steamship lines and moving in Maritime containers.
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Re: KCSdeM and Port of Lazaro Cardenas

Postby Gilbert B Norman » Thu Feb 09, 2012 7:29 am

Mr. JayBee, Monday's Wall Street Journal column, "Heard on the Street", supports your view that, with or without an increase of 'ex/im" traffic, Mexico and its two US owned roads, will "do OK". The column holds that China is "maturing' with rising real estate and labor costs:

http://online.wsj.com/article/SB1000142 ... 33428.html

Brief passage:

    A handful of transportation companies have the most to gain. Kansas City Southern Railway's Mexican subsidiary controls a rail system that stretches deep into Mexico. It also controls a railroad bridge that spans the Rio Grande at key border crossing Laredo, Texas. Union Pacific has a 26% stake in Mexican railway Ferromex and serves six major border crossings. Shares of both companies have risen sharply over the past year, but earnings have more than kept up. Kansas City Southern trades at 23 times trailing earnings, compared with 34 a year ago; Union Pacific's P/E ratio has fallen to 17 from 19. The third major railway serving Mexico is Berkshire Hathaway's BNSF.
However, the column dismisses the Mexican political and social unrest - a condition hardly conducive to any enterprise considering expansion of their business activities when, to a multi-national concern, "all the world's a stage".
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Re: KCSdeM and Port of Lazaro Cardenas

Postby Gilbert B Norman » Mon Jan 20, 2014 9:30 am

CNN reported this past November that the political unrest continues in the State of Michoacan:

http://www.cnn.com/2013/11/05/world/ame ... s-to-port/

Brief passage:

    (CNN) -- One of Mexico's most important seaports is now under the control of the military in a show of force as the government fights corruption and drug cartel violence.

    The port of Lazaro Cardenas lies on the country's Pacific coast, in the troubled state of Michoacan. While violence has tapered off in some parts of Mexico, Michoacan continues to be a hot spot of violence between cartels and, more recently, vigilante groups.

    The Mexican navy, army, federal police and attorney general's office swept into both the port and city of Lazaro Cardenas on Monday, relieving local law enforcement of its duties, a government spokesman said
While the KCS's 'bet' on acquiring the NdeM was based only in part on the development of Lazaro Cardenas into a 'world class' maritime port - the increased industrial activity and manufacture of consumer goods also being part of the 'bet' - this continued violence and the term 'Mexico's most lawless state' can only have adverse effect upon Asian shippers desire to have the vessels handling such landed at this port. This of course will adversely affect the volume of container traffic KCS can expect to handle.

disclaimer: author holds long position KSU; up 48.3% during '13 - S&P up 29.6%
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Re: KCSdeM and Port of Lazaro Cardenas

Postby Gilbert B Norman » Tue Apr 18, 2017 1:05 pm

In the three years this topic has laid dormant, we have seen Neo-PANAMAX, President Trump, and, beyond El Chappo in the clink, no change to Mexico's political instability.

Yet, as reported in Monday's Wall Street Journal the Danish shipping concern, Moeller-Maersk, has moved ahead with developing the port:

https://www.wsj.com/articles/BT-CO-20170416-700460

Fair Use:

Major importers such as Wal-Mart Stores Inc., Samsung Electronics Co. and Target Corp. see Lázaro Cárdenas as a key link between Asia's factories and Mexico's growing middle class. They also hope to use the port as a backdoor to the U.S., bypassing congested West Coast ports via the "Nafta Railway," a network of track operated by U.S. railroad Kansas City Southern that can shuttle goods as far north as Memphis

I note the article is silent regarding any Neo-PANAMAX impact. Could my oft expressed thought that East Coast ports spent a hunk of taxpayer $$$ to throw a big party - and nobody came have some foundation? Could existing trade routes outlive the Trump administration - be it to '20 or even '24? Maybe KCS's bet hasn't gone South (and speaking of direction, KCS can handle traffic on either their own or "friendly" roads a bit further North than Memphis).

I'm going to close here with "we report, you decide".
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