BMI View: Economic growth in Mexico will accelerate in 2015, driven by stronger private consumption , an uptick in fixed investment and robust US demand for the country's manufactured goods exports. This will drive up demand across all freight modes, with 6.4% growth in rail freight tonna ge, 3.2% growth in road freight and 3.8% growth in airfreight over 2015.
The Mexican economy will improve significantly in 2015, following sluggish growth in the last couple of years. We forecast real GDP growth of 3.5% in 2015, up from projected 2.1% in 2014 and 1.4% in 2013. This will boost demand for imported goods, while a similarly positive outlook for the US will drive up the volume of Mexican exports transported to the US. These complementary trends offer significant advantages for the road and rail freight sectors in particular, though we also expect to see increased imports of consumer electronics and pharmaceuticals over the medium term supporting airfreight tonnage growth.
A major upside risk for operators in the Mexican freight transport sector is presented by the growing trend of 'nearshoring', the practice of moving production centres closer to consumer markets. Increasing oil prices, rising wages and weather disruption to supply chains has caused companies to look away from Asia and towards Mexico when considering where to base their production centres. Advantages to be gained from nearshoring in Mexico are lower freight costs, faster time-to-market rates and lower inventory costs. This trend should be of huge benefit to Mexican freight transport operators, as more production centres in the country means more volumes to transport to the US consumer markets.
According to BMI's Key Projects Database, there is USD26.2bn worth of transport infrastructure projects planned or underway in Mexico. This is good news for the sector, as the government's National Infrastructure Plan (NIP) lost all momentum in the wake of the 2008/09 financial crisis. Flagship public-private partnership (PPP) transport projects have gone to tender and failed to generate any interest. Examples include the FARAC II Pacifico Sur toll road and the Riviera Maya Airport package. However the improving investment conditions are likely to spur developments and this will pose significant advantages to all three freight sectors over the next few years.
Road freight makes up the bulk of landside freight transport in Mexico and we project steady growth to continue over our forecast period. In 2015, we forecast that growth in road haulage will be 3.18%, which if realised, would take the year-end volume figure to 531mn tonnes. We project average growth of 2.9% to 2019. Growth in the road haulage sector will be supported by the macroeconomic picture and the growing power of the Mexican consumer. Equally, the recovery of the US economy and American consumer sentiment will be a strong boost to road freight companies, as manufactured goods will be shipped north of the border. More Mexican road haulage companies have been applying to the US Federal Motor Carrier Safety Administration (FMCSA) for admittance to the NAFTA US-Mexico cross-border trucking pilot programme, enabling them to carry freight on both sides of the border. However, we note downside risk to our growth outlook for Mexican road haulage volumes, and caution that the sector will be more reliant on domestic volumes than exports.
Our 2015 growth forecast for rail freight volumes in Mexico is 6.39%, supported greatly by continued growth in volumes to the US as its recovery continues. This would take volumes handled to 122.48mn tonnes, up from 2014's forecast 115mn tonnes. Over the medium term we project that growth will average 4.5% a year, with risks largely to the upside as rail links with the US and connections of the rail network to Mexican ports improve.
We expect that consumer confidence will continue to improve over 2015, and this, combined with a declining unemployment rate, will drive up demand for imported consumer goods, particularly lightweight consumer electronics much of which will be delivered by airfreight. In addition continued demand for pharmaceuticals imports will further support airfreight growth of 3.8% to reach 117000 tonnes.
Key BMI Forecasts:
Road freight will rise by 3.18% year on year over 2015 to reach 531mn tonnes.
Rail freight will rise by 6.39% to reach 122.4mn tonnes.
Airfreight volumes will rise by 3.8% to reach 117,000 tonnes.