Photo: Courtesy of TILH, 2013.
The concept of port regionalization is inciting ports and terminal operators to look at the hinterland to support their core terminal business. Such a process takes different form based upon market conditions, the availability of land and the infrastructure available to connect a port with inland intermodal centers. Terminal Intermodal Logistica de Hidalgo (TILH), which opened in 2012, is an inland port facility owned and operated by HPH (80% stake). It is located in the southern part of the state of Hidalgo about 50 km north of Mexico City, one of the world’s largest metropolitan areas with a population of more than 21 million people. HPH is the dominant container terminal operator in Mexico, handling about 50% of the country’s container port throughput in four major terminal facilities (Ensenada, Veracruz, Manzanillo and Lazaro Cardenas). Mexico City as an origin or destination accounts for 40% of all the container cargo handled by HPH, generating about 700,000 TEU per year. In recent years, significant developments have taken place in the northern part of the metropolitan area with several large retailers and manufacturers establishing distribution facilities in the area (e.g. Liverpool, Costco, Home Depot, Wal-Mart, Philips and Diago).
Because of its geography, the Mexico City metropolitan area has a scarcity of large surfaces of flat land, implying that the TILH site required significant modifications (mostly infill and grade adjustments) to make it suitable for intermodal operations. The site includes a planned greenfield logistics zone of 123 hectares (Zona de Actividades Logisticas Hidalgo – ZALH; 80% owned by the Mexican trucking company Unne) co-located with an intermodal terminal facility covering 28 hectares (a total of 53 hectares when the second phase is completed), with an additional 10 hectares allocated to customs. Securing land was a complex endeavor that took 3 years since the ownership of the rural land was collective and required a process where it was transferred to the state and then to private interests (HPH and Unne). Recognizing the potential of such a facility and its logistics zone for employment and regional development, the public sector contributed by building an access road, a bridge and providing utilities (electricity, water and sewage).
TILH is handling import and export cargo from Veracruz and Lazaro Cardenas by truck and rail. It is a grounded intermodal facility where containers are stacked trackside (see above photo), which is different from the standard North American chassis-based storage. The initial intermodal capacity of the facility is about 200,000 TEU and once all expansion phases are completed, the capacity would increase to above 1 million TEU. In its current setting, the terminal provides 4 rail sidings of 600 meters directly connected to the rail network of two of Mexico’s largest railways; Kansas City Southern de Mexico (KCSM) and Ferrosur, placing it an an unique competitive position (Ferromex has also a line nearby). Through KCSM, on-dock rail facilities at Lazaro Cardenas can be serviced and through Ferrosur and KCSM rail corridors, the on-dock rail facilities at Veracruz are serviced. However, since TILH is owned by HPH, it competes with some of the intermodal terminals of KCSM and Ferrosur, implying a level of reluctance from the rail carriers to service TILH.
The main value propositions of the facility are:
- Modal shift. Like many developing countries, the share of trucking for inland distribution in Mexico is very high, which is linked with congestion, energy consumption, air pollution and delays. The expectation is that the inland port will favor a modal shift of a share of the cargo bound to Mexico City to rail, thus improving the cargo capacity (rail economies of scale) and the use of a more energy efficient mode. One of the key advantages of the facility is its direct connectivity to both the Pacific and Atlantic maritime ranges where HPH operates port terminals. Veracruz on the Atlantic side is about 500 km away while Lazaro Cardenas and Manzanillo on the Pacific side are about 600 km away. This distance is at the threshold of commercial competitiveness for rail services.
- Custom clearance and dwell time. Importers have the option, through bounded deliveries, of having the custom clearance deferred to the inland port instead of at the gateway port. This can lower inspection costs as well as delays. Inland terminals having abundant storage space can also offer convenient dwell time, implying that they can partially act as a warehouse for their customers since a container at the inland port can be considered as part of the inventory of a nearby distribution center.
- Load center. As a facility integrated to the maritime ports it is linked to, TILH acts as a deconsolidation (for imports) and consolidation (for exports) center. This can be effective to attract and retain customers as well as improving the quality of the transport service since the HPH port terminals and TILH are one functional transport chain. In addition to the inland accessibility from ports on the Atlantic and Pacific sides (longitudinal flows), TILH has the potential to become a load center for the NAFTA trade (latitudinal flows), which remains dominantly serviced by trucks. Its access to the Lazaro Cardenas – Laredo – Kansas City corridor offers a strategic commercial opportunity.
- Metropolitan accessibility. A logistics cluster (intermodal terminal and nearby distribution centers) offers a platform that is better placed to service a metropolitan area (Mexico City) than direct truck services from port terminals, particularly if well connected to an urban highway system. There are also more opportunities to deconsolidate the cargo in loads that are more suitable to urban demand (high frequency) and driving conditions (congestion).
- Cargo security. Cargo moving long distance by rail is much less prone to theft, which is a significant concern in Mexico, particularly in its main commercial hinterland. FreightWatch International ranks the cargo theft risk in Mexico as severe with hijacking accounting for more than 80% of the incidents. By moving the cargo directly from a secure on-dock rail facility to an inland terminal by rail the risk of cargo theft is dramatically reduced. This is linked with lower insurance premiums.
Since TILH represents a novel intermodal model for Mexico, it has faced the challenge of securing regular rail services to its facility. Customs operations began in July 2012 and the first train services began shortly after in September 2012. While traffic was slow to pick up in the first two years of operations, by 2014 the inland terminal was able to handle more than 100,000 TEU ranking it as a medium sized intermodal facility in North America. The development of TILH underlines the importance of being proactive in developing hinterland intermodal facilities and the weight major customers can have in inciting the usage of novel approaches in hinterland logistics.