Analysis: U.S. transport companies cashing in on Mexico trade boom

Tue Dec 4, 2012 1:01am EST
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By Lynn Adler

(Reuters) - U.S. rail and trucking companies are making big investments on both sides of the border with Mexico to capitalize on booming trade between the two countries.

Every day, about 10 Kansas City Southern (KSU.N: Quote) trains hauling everything from cars to chemicals crisscross the border between Mexico and the United States at Laredo, Texas, up from about six just three years ago.

The fourth-largest U.S. public railroad is leading the charge to take advantage of the swelling freight between the countries as manufacturing booms south of the border because of the rising costs of goods from China and other overseas exporters.

Over the past five years, Kansas City Southern has spent about $300 million to lay roughly 90 miles of new track in Texas, buy and update terminals in Mexico and make other network upgrades. The rail company now generates one-quarter of its revenue moving parts and finished goods across the border.

Union Pacific Corp (UNP.N: Quote), the No. 1 U.S. railroad company, owns a 26 percent stake in Mexican railway company Ferromex.

Like its rivals CSX Corp CSX.N and Norfolk Southern Corp (NSC.N: Quote), Union Pacific partners with Kansas City Southern to haul carloads in the United States to locations not served by the railroad.

As the U.S. economy creaks along, the growing business with Mexico is a cause for cheer: Both Kansas City Southern and Union Pacific are reporting much bigger increases in cross-border shipments than in overall volume.

Two areas that are "just exploding" are transporting automobiles into the United States and intermodal shipping - moving goods in containers that are shifted from truck to train or train to ship, said William Galligan, vice president of investor relations at Kansas City Southern.   Continued...