Kansas City Southern Railway (KCS) will develop a US$99 million cargo processing facility at the U.S.-Mexico border, aimed to improve traffic between southern Texas and the state of Tamaulipas in northern Mexico.
Once the facility is completed, the company forecasts it can increase traffic from 24 to 32 trains crossing daily. Currently, it operates 24 trains per day, as infrastructure poses a bottleneck, limiting further traffic expansion.
Such infrastructure revamp comes along with procedural changes to smooth crossborder activity, including a program with U.S. and Mexican customs authorities to set up joint inspections in Laredo, Texas, a port that handles more than 37% of rail traffic between the U.S. and Mexico.
The company also negotiated with trade unions not to change drivers when trains cross the border. Both measures, along with the new processing facility are expected to increase traffic by 33%.
KCS is the main rail freight operator in the U.S. offering services to Mexico, serving 12 ports on the Gulf of Mexico and one on the Mexican Pacific coast. The company handles cars and auto parts, steel, grain, and oil-derivative products.
The company profits increased 34.8% in the third quarter, boosted by a strong growth of cross-border traffic between the U.S. and Mexico.
KCS reported net income of US$174 million up from US$129 million in the third quarter on record revenues of US$699 million, which represented an increase of 6% from prior year on 4% volume growth.
Revenues increased in three commodity groups, led by a 17% increase in Chemicals and Petroleum due to refined product shipments to Mexico. In fact, fuel carloads moving into Mexico from the U.S. increased by 164% from 5,132 units in the third quarter of 2017 to 13,355 in the same period of 2018, according company officials at the Q3 earnings conference call.
KCS cargo volume increased after the Mexico government introduced new regulations on truckers; however, the company now faces some real challenges as car congestion has increased.