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Ocean Freight in Mexico Pros and Cons

Hier Logistic Group > News > Uncategorized > Ocean Freight in Mexico Pros and Cons

Ocean Freight in Mexico Pros and Cons

Posted by: Arlethe Hernández
Category: Sin categorizar, transporte marítimo internacional
Ocean Freight

Maritime transport is considered the most widely used means of moving goods in the world. Most of the world’s trade uses sea freight to move its products.

In spite of the existence of other more efficient means of transport in terms of time and availability, such as air or land, they have not been able to replace the leading role and importance of maritime transport in the world of international logistics. This is due to one main reason: to transport more at a lower cost.

In recent years, the growth and evolution of maritime transport of goods has been exponential, allowing to shorten distances and unite countries, meeting their commercial needs through the service of moving products, exceeding the billions of tons per year.

Pros of sea freight transport for national and international trade

The advantages of maritime transport in Mexico depend on the type of product or merchandise to be transported. However, its benefits are very well established when the common characteristics of the products are marked.

  • Volume and capacity of transport: one of the most important advantages of this type of transport is related to its capacity. Ships or vessels, the vehicles used for this service, allow the movement of large quantities of goods, surpassing other means of transport such as air, land and even rail.
  • Very competitive prices: sea freight is considerably cheaper and more competitive than that of other means of transport. Mainly because they are calculated by the volume of goods, that is, the greater the quantity, the cheaper it is.

It admits a great variety of products and materials to transport: the capacity to transport almost any type of products and materials places it above its peers when moving goods

Although mainly the merchandise is transported in enormous containers that allow to pile up, to protect and to manipulate more sure form the merchandise, the marine transport is the only one able to take a liquid load or considered dangerous, like fuels and chemicals.

  • Safety and stability in each shipment: unlike other means, this type of cargo transport has so many limitations due to weather or climate conditions. Thanks to the robustness, resistance, and reliability of the ships, the transfer of the goods is possible under almost any circumstances.
  • Moreover, thanks to the fact that the planet is shaping up in ¾ parts by water, maritime transport can reach almost anywhere in the world safely, on time and in good shape.

Despite its great advantages, the transport of goods by sea also has cons.

  • Customs formalities: compared to other forms of transport, they are more complicated and extensive due to a large number of forms and permits required to move the goods.
  • Time: speed is not one of the qualities of this means of transport. The deliveries are usually long, so it is necessary to take this into consideration when making any shipment.

Ocean freight in México

Maritime transport is one of the main contributors to Mexico’s foreign trade, where around 85% of imports and exports are carried out by this means.

By 2017, about 5.5 million containers were in transit. For the year 2018, growth in Mexican ports rose 8.3% in the first half of that year compared to the same previous period.

In this way, ocean freight services in Mexico are crucial to boosting domestic and international trade to a large extent.

What about ocean freight rates in Mexico?

According to the U.S. Department of Agriculture, freight rates for sea freight in Mexico have been decreasing since early 2019, despite the increase in the second quarter of 2018.

These values represented the lowest value of the historical maximums. However, when compared to the previous quarter, freight rates for bulk grain shipments to Mexico increased during the second quarter, compared to the average of the last four years.

Even so, there is no certainty that rates will increase or remain low, nor for how long. Following the introduction of the International Maritime Organization’s Ballast Water Management System (BWMS) in September 2017, demolition of older vessels is expected to increase in the coming years.

This means that the supply of ships will be temporarily reduced, as many of them will be scrapped or taken to shipyards for refurbishment, which would generate pressure on rising sea freight rates.

IMO Regulation 2020: How does it affect the transport of merchandise by sea through Mexico?

With the delivery in force from January 1st, 2020 and with duration for the next 30 years, the new environmental regulations in the maritime sector bring many expectations and uncertainties.

What is IMO 2020?

It is a regulation established by the International Maritime Organization that will limit sulfur oxide emissions from ships. The aim is to reduce emissions from 3.5% to 0.5% mass/mass. Read more.

Does it affect Mexico? The answer is yes

Mexico, being the main foreign supplier of crude oil to refineries on the US Gulf Coast, would be forced to change the way it values its most exported oil grade.

Petróleos Mexicanos (PEMEX), could be forced to remove high-sulfur fuel oil from the pricing formula for Maya crude due to IMO regulation 2020.

Mexican crude represents a necessity for U.S. refineries, as well as a quarter of all oil imported by companies on the Gulf Coast.

Thus, the challenge is not only related to the new regulations for 2020, but also to the largest reduction in oil production in the last 14 years in light and heavy oil.

Author: Arlethe Hernández

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