Courtesy of FreightWaves
US-Mexico Freight Dynamics in Times of Contracting Capacity
February 19, 2020
The bankruptcy of several trucking firms during 2019 put a spotlight on the presence of excess capacity in the market. This “excess” occurred because of a surge in freight in the last couple of years, particularly in 2018. In turn, some trucking fleets bought more equipment in the hopes of cashing in on the robust market. As the market plateaued and trends began to reverse, the fortunes of these trucking companies sank along with it.
The collapse of Celadon in December 2019 was a huge blow. It is the largest U.S. truckload carrier company to declare bankruptcy to date, putting 3,500 employees out of work and dramatically impacting the capacity available in the market. This was especially true in the Interstate 35 corridor that connects Laredo, Texas, to the Midwest, where Celadon was a dominant player in hauling automotive freight.
Aside from Celadon’s departure, several major trucking firms pulled out or limited their trailers moving into Mexico, exacerbating the shortfall in capacity across the border. This decline in the number of U.S. equipment circulating in Mexico boils down to simple economics – trucking firms find better return on investment on their trailers when they are moved around in the U.S., rather than in Mexico.
With Laredo being the largest freight corridor in and out of Mexico to the U.S., the potential impact on the corridor during the peak season of May through July may be sizable.
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