Kansas City Southern in Oct '18 issue

[Convicted One]

I really enjoyed the magazine's feature article breaking down KCS's international operations. I've been wanting to know more ever since you wrote about Mike Haverty's "vision" several yers ago.

I'm a little confused in one area.  Clearly the intent from the headline on the magazine's front cover is to emphasize the International success of KCS. And at least twice in the article you attempt to apportion KCS's operations based upon it's international structure [particularly on page 33 where you break down KCS's intermodal business as being 25%  cross border, 25% cross border interchange,  25% international thru Lazaro Cardenas, and 25% Merridian Speedway(which you further qualify as "US Domestic)]

One thing just kept going through my mind. "What about Panama?" Is the intermodal business of KCS in the canal zone so small that it doesn't even factor into the bigger picture of the parent? Or is there some unspoken intent to limit the scope of this article to North America only?

Just curious, since the lead-in to the article went to such length to emphasize the importance of international trade to KCS's wellbeing. 

[Bill Stephens]

The Panama Canal operation is, indeed, a very small part of the overall company.

It's still operating, of course, and continues to handle international containers between the Pacific and Atlantic coasts of Panama.

But it doesn't figure into NAFTA at all and is really all about making the canal transit less expensive for container ships by diverting some of the boxes to rail for the journey across the isthmus. Interesting operation down there nonetheless.

Thanks for reading.

Bill

[Convicted One]

bstephens

Thanks for reading.

And thank you for your reply.

Per your article, I wasn't too surprised to read that the anticipated incoming (to the USA) lane through Lazaro Cardenas never materialized. The afore mentioned Mike Haverty piece in an earlier edition of Trains mag, seemed overly enthusiastic laudingthe  "shortest route to the Pacific" as though imports were going to start flowing that way.

Do you know, off hand, what type of ship-side traffic operates through that port? Do they get many  incoming containers from Asia? Or is that mostly an export venue?

[Bill Stephens]

Lazaro is a busy containerport that was expanded last year with the addition of an APM/Maersk terminal that can handle 1.2 million TEUs. The HPH terminal can handle 2 million TEU. The port also handles autos and bulk commodities like grain and chemicals. 

Like most West Coast ports, Lazaro has an imbalance of inbound loads from Asia. Empty container availability is one factor that may help drive export of Gulf Coast plastics to South America and Asia via Lazaro.

KCS has lost market share for containers moving inland in recent years, largely due to the decline in the value of the peso relative to the dollar. KCS bills in dollars, while truckers bill in pesos, so intermodal's cost advantage has eroded. KCS will tell you that the cost advantage is quickly erased if a container full of TVs is stolen, something that happens with alarming frequency on highways but not on KCS's rail network. To fill up a couple of trains that link Lazaro and Mexico City, KCS has begun a rebate program tied to volume. They are experimenting with it at this point to see if it can regain market share while retaining price and profitability on what's a pretty short haul.