Nearshoring is gaining ground as more companies move from China to Mexico


As shippers reevaluate their sourcing options, Mexico is gaining ground as a nearshoring hub and stealing import share from China.

Shipment volume from Mexico to the U.S. increased 20 percent year-over-year, when measuring the 14-day average number of tracked shipments for the company’s customers, according to FourKites data.

Although volume continues rising, delayed shipments for exports out of Mexico are down 25 percent year-over-year, per the supply chain and transportation visibility platform—which seems counterintuitive as more products in the pipeline would suggest higher congestion.

But according to Glenn Koepke, FourKites’ general manager of network collaboration, this speaks to better planning at ports and borders, and more transportation and logistics investments to better understand supply chain visibility and source labor.

“What we typically see is when volume goes down, waiting time, detention costs and dwell time also go down in parallel,” said Koepke. “There’s a correlation though, to the sequencing of the volume. If the volume is going down 10 percent overall, but all of a sudden, it’s only concentrated in one day, it still creates a bottleneck at different ports and border locations and different physical sites. The waiting time makes sense based on what we’ve seen, and the market did need to recover.”

A Brookings Institution report predicts that $60 billion-$150 billion will flow into Mexico as a result of new manufacturing investments and relocations. A recent Prologis report indicated that net absorption—the amount of real estate space that became occupied minus the space that became vacant—in Mexico’s six major markets doubled from 2019 to 2022. Vacancy in those regions fell to just 1.1 percent in the 2023 first quarter after averaging 6 percent in pre-pandemic years. Of the sites under still construction, 60 percent have been pre-leased versus just 36 percent in 2019.

Mexico’s gain could be China’s loss, and other markets, too. In November 2022, the Mexican Economy Minister’s office identified more than 400 companies that plan to relocate production from Asia to Mexico. Two months later, the U.S., Mexico, and Canada established a goal to produce in North America 25 percent of the goods they currently import from Asia under a new drive to promote Mexico’s economy.

The ongoing shift toward Mexico comes as the volume of shipments from China to the U.S. tracked by the FourKites platform has declined 44 percent year-over-year.

Even China-based Shein is reportedly looking to build a factory in Mexico.

When exclusively singling out apparel and textiles, Mexico’s imports declined slightly year-over-year through April at a pace of 1.6 percent, according to OTEXA data, while China’s were down 32.1 percent.

Source: El Financiero

Monterrey Daily Post