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August 20 2018

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August 20 2018 | The Journal of Commerce 41 www.joc.com Surface Transportation during a July 20 earnings call. "We continue to work on operational improvements at the border to ensure we have capacity to achieve planned growth," Songer said. KCS last August opened a US-Mexican rail cargo processing fa- cility in Laredo to speed trains across the border, and has started opera- tions with international crews. "Our customers are actively looking for options on rail," Brian Hancock, executive vice presi- dent and chief marketing officer, said during the earnings call. The exchange rate has caused pricing problems for KCS in Mexico, howev- er, as the railroad charges customers in dollars rather than pesos. "Certainly, there is more in- termodal business," Hancock said. Some of that business may be driven by tariffs imposed by the US, not on Mexico, but China. "Product [that] may have been coming from China ... it's now coming in through the US and then down into Mexico into the steel plants," he said. Transplace's cross-border inter- modal business is expanding, Godinez said, partly as a result of a greater ef- fort by the third-party logistics provid- er but also tightening truck capacity. Truck-to-rail conversion is likely to become more palatable to shippers as capacity in Mexico tightens. Like the US, Mexico is having a hard time finding enough truck drivers. "The problem is different here, but it's of the same magnitude," Godinez said. And it's just as hard to solve. "I don't see anything that will change the problem of the lack of truck drivers," he said. "It's not an easy job and not a fancy job. You have many manufacturing plants that pay as well as trucking companies. And security is still a concern for drivers in certain regions." Security is an issue for railroads as well. Even so, "customers are moving from truck to rail," he said. "Shippers need and want solutions. There's not a lot of capacity in the market, and even if you have a beau- tiful new truck, you need to have someone driving the wheel. They need to come together." JOC email: bill.cassidy@ihsmarkit.com twitter: @willbcassidy Union Pacific Railroad also reported strong automotive ship- ments from Mexico that helped boost its finished-vehicle traffic in the latest quarter. Cross-border intermodal revenue at KCS was flat year over year, but US-Mexico intermodal volume rose 5 percent from a year ago, the company said in its second-quarter earnings report. Overall, cross-border volume carload and intermodal freight jumped 13 percent for the railroad. Congestion in the first and early second quarter slowed cross-border traffic and increased dwell time at KCS's northern Mexico terminals, but that congestion "is largely behind us," Jeffrey Songer, executive vice president and chief operating officer, told investment analysts first hours-of-service rules will re- quire drivers to take eight consecu- tive hours of rest after working 14 hours and to take a 30-minute break after driving five hours. That could mean longer transit times within Mexico. New rules on doubles also threaten to constrain capacity. "We shall see how fast and big an impact we see," Godinez said. Mexico-US rail shipments grow Railroads also are seeing a surge in Mexico-US freight traffic, both intermodal and carload. Kansas City Southern's (KCS) cross-border revenue increased 19 percent year over year to nearly $220 million in the second quarter, propelled by higher automotive, chemicals, and petroleum volume, KCS said. "There's so much demand in the US right now, that when trucking companies look at utilization and productivity, they will use their available capacity for domestic freight because they can generate more turns."

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