Union Pacific owns a 26% stake in Ferrocarril Mexicano, or Ferromex. which operates a track network of over 8,100 kilometers (or approximately 5,000 miles) covering more than 70% of Mexico. It serves the Mexico City – Guadalajara – Monterrey triangle, with access to four ports on the Pacific Ocean and two on the Gulf of Mexico. The railroad is the largest subsidiary of Infraestructura y Transportes Mexico (ITM), which in turn is a division of Grupo Mexico.
It’s a complex ownership structure but Grupo Mexico is planning an initial public offering of 15% of its ITM division and, the growth of the petrochemical industry and other cargo should lead to increased profitability for these rail units.
Mexico is an important end-market, representing nearly 10% of Union Pacific’s consolidated revenue. The company moves traffic from every commodity group to or from Mexico that is evenly split between Kansas City Southern de Mexico and Ferromex. Northbound shipments account for roughly half of Union Pacific’s overall cross-border traffic, predominantly consisting of finished vehicles, auto parts, beer and food products, and intermodal shipments (combined these represent over 90% of the northbound traffic). Southbound shipments predominantly are made up of auto parts, grain, dry feed ingredients, intermodal, steel, plastics, minerals, meals and oils, and soda ash.”
Kansas City Southern Mexico
It is also expected that robust growth in automobile production will benefit carriers like Kansas City Southern which operates across the Gulf of Mexico. The company has access to 12 automotive plants and is in talks with automotive makers to build five more near its rail network. Kansas City Southern is also poised to gain from automakers like Audi AG, Kia Motors Corp., Mercedes-Benz, Infiniti and BMW AG which are expected to open facilities in Mexico.
As Mexican railways invest in upgrades that make their services more reliable, shippers are more apt to consider rail, especially intermodal, as a less expensive alternative to long-haul truck
Mexico’s current rail system started to take shape in 1995, when the Mexican government announced its privatization plans. U.S. railroad Kansas City Southern (KCS) and Mexican company Transportación Marítima Mexicana (TMM) formed a joint venture to buy the Northeast Railroad concession. KCS bought out TMM’s share in 2005 and changed the railroad’s name from Transportación Ferrovaria Mexicana to Kansas City Southern de México (KCSM).
In 1998, mining corporation Grupo Mexico and U.S. railroad Union Pacific (UP) joined forces to buy the Northwest Concession, creating Ferromex.
In 2005, Grupo Mexico bought a third Mexican railroad, Ferrosur, which operated in southeastern Mexico. Having spent several years overcoming legal challenges, Grupo Mexico is currently merging Ferrosur with Ferromex.
Ferromex and KCSM offer cross-border service in partnership with KCS, UP, and BNSF Railway. The U.S. and Mexican railroads pass freight from one jurisdiction to the other at six major border crossings. The U.S. sides of these crossings are in San Ysidro and Calexico, Calif.; Nogales, Ariz.; and El Paso, Eagle Pass, and Laredo, Texas.
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