BMI View: Th e freight industry in Mexico is forecasted to grow over the medium term as economic growth will accelerate. Stron ger private consumption and a continued increase in US demand for the country's manufactured goods exports helps drive up demand in all freight modes.
The Mexican economy is forecasted to grow over the medium term, resulting in higher employment rates and an increase in consumer spending. The economy is set to improve significantly in2015 and we forecast a real GDP growth of 3.5% up from a projected 2.1% in 2014. This will boost demand for imported goods while a positive outlook also 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.
Mexico has made concerted efforts to liberalize its once closed economy through entering into free trade agreements with other nations. There are few tariffs between Canada, the US and Mexico, creating a free market between these countries. Mexico can export duty free to North America, South America, Europe and Japan, which is unique to Mexico. The top commodity category for all modes transported between the US and Mexico in June 2015 was vehicles and parts, which over 50% were moved by truck and 41% were moved by rail.
Road freight will continue to be Mexico's largest freight mode over the medium term. In particular, a rising online retail sector due to increased internet access in Mexico, will help volumes in this freight sector steadily increase. Goods purchased online are often dependent on trucks and vans for delivery and therefore us the road freight sector more than other freight modes to get to the customers. A growing economy resulting in increased consumer spending because of higher employment rates is forecasted over the medium term, which means road freight will remain the largest freight mode in Mexico until 2019.
Rail freight will be the fastest growing freight mode over the next four years, with an improvement in infrastructure accelerating growth. Mexico's central location between the South America and North America and especially with a new US-Mexican rail crossing, rail freight is expected to increase its volumes over the medium term. As US recovery continues, volumes in rail freight will continue to grow.
Air freight is forecasted to benefit from higher employment rates and an expanding middle class and therefore growing disposable incomes which will increase consumer goods reliant on air freight. Regardless of still being Mexico's smallest freight mode, it will have a steady growth in volumes due to the consumer electronics demand. Agricultural products, precious metals and oil products are all dependent on rail freight, and the continued demand for these products will keep volumes in rail freight at a steady growing pace. . In addition continued demand for pharmaceuticals imports will further support airfreight growth of 3.8% to reach 117000 tonnes.
A new US-Mexican rail crossing has opened and is designed to speed up delivery between Bronswille, Texas and Matamoros in the Mexican state Tamaulipas. It is part of an overall effort to expand trade between the US and Mexico. and will mainly carry freight. It is the first US-Mexico rail link to open in more than a century.
The value of US-Mexico freight totaled US47.1bn in June, up 4.4% from a year earlier as truck, rail and air freight carried more US-Mexico freight than in June 2014. Year over year, the value of US-Mexico truck freight rose 10,5%, the largest percentage increase of any mode.
Key BMI Forecasts:
Road freight will rise by 4.14% year on year over 2015 to reach 532mn tonnes.
Rail freight will rise by 5.92% to reach 123.9mn tonnes.
Airfreight volumes will rise by 3.5% to reach 117,000 tonnes.