The Port of Veracruz has historically been important for trade between the Americas and Europe and the Caribbean. Today, it is aiming to be a hub for automotive trade. Located in the state of Veracruz on the Gulf of Mexico, f the country. 768,924 automobiles were exported from or imported into Mexico in 2005 thru Mexican sea ports.
The port of Veracruz hopes to cash in on the fact that it is close to many automotive manufacturers. It claims to be the first port in Latin America to have a specialized facility for automobiles. It plans to offer further facilities to store and service automobiles in the future.
The port of Veracruz has cessionary companies like SSA Mexico (a 100% subsidiary of the US based port and terminal operator Carrix), which provides stevedoring and marine terminal services at Veracruz. The company handles 90 % of the total movement of cars in the port, primarily handling Volkswagen’s business. Volkswagen uses Veracruz to export the vehicles it manufactures at its plant in Puebla, Mexico. SSA Mexico also offers services to automotive giants like Ford, General Motors, BMW, Chrysler, Renault, Volvo, Land Rover, Jaguar, Audi, Seat, Honda, Mercedes Benz, Porsche and Nissan. Otherwise, the port cessionary company Corporacia Portuaria de Veracruz (CPV) handles the rest 10 % of the total market of cars in Veracruz, primarily handling Peugeot, BMW, General Motors and Renault.
Speaking in an interview, Francisco Kassian, General Manager at SSA Mexico which runs port activities at Veracruz, had said: “Veracruz has been the best entry and exit point for the automotive industry. Today there is much recognition of cars manufactured in Mexico, but we have to review price and quality, and I am referring to everything from maritime handling to the transportation.”
In 2003, the Integral Port Administration or API of Veracruz allocated nearly 300 ha. to expand and improve the ports capacities. The refurbishing and expansion plan will be completed by 2006. This will mean that the port, which was handling 17.1 million tons in 2005, will be able to handle more than 22 million tons by 2010. The revamp of the Port of Veracruz includes the construction of a new highway to be finished in June 2006 that will connect the ports facilities to the arterial highway of the Veracruz-Jalapa (Capital State of Veracruz) highway and the Industrial Park of Veracruz. Plus, the port will have improved links to railways as well as other docks which some of them have been already concluded. Dredging works to be finished during 2006 in order to get an average of 42′ of depth (currently the port has 32′ in average). The plan includes building a new logistics park.
Many automotive firms use the port to import goods from Europe, USA, as well as central and South America. Automotive giant, GM, uses the port to move products in and out of the country.
Besides the leadership regards on car handling in Mexico, the port of Veracruz has been the leader Mexican port in the grain cargo handling for may years; having the 2nd place as a port in Mexico for container handling with 621,000 TEUs (twenty foot container units) in 2005.
Although the modernization of the port of Veracruz is not complete, shipping companies, exporters and importers feel that operations have already improved. A computerized system allows customers of the port to track their cargo around the clock by using the internet. Similarly, the waiting period for a berth has come down drastically in the last few years. This is because already, loading/unloading productivity rates of the port have increased according to international standards, and sometimes higher than those.
Automotive Industries spoke to Arturo Marin, commercial manager of the Port of Veracruz, asking him what else the port plans to do to develop itself as a hub for automotive shipments.
AI: Why is it important for the port of Veracruz to attract automotive customers?
Arturo Marin: The leadership of the port of Veracruz into the automotive trade is a result of many years of joint efforts between the Cessionaries, mainly by SSA Mexico (Ex Operadora Portuaria del Golfo and later on TMM Ports and Terminals), automotive companies, trucking and rail companies, port authorities, custom brokers and us, as the Port Administrator. But definitely supported by the geographical situation of the port and its hinterland in relationship with some car plants located in Mexico, primarily the plant of Volkswagen located at 187 miles of distance of the port; and considering that only Volkswagen volume represents nearby 50 % of the total in and out automotive market of Veracruz.
Also, the port of Veracruz has gotten recognition by the most important automotive manufacturing companies in the world due to its port infrastructure, very high capable companies which offer qualified and added value services to the car handling. But also due to truck and rail companies, Kansas City Southern de Mexico and Ferrosur, which support the logistic chains from and to the port. These capabilities become materialized through out very competitive handling operational rates based on a high level labor: 100 car units per hour/vessel in average; dramatic reduction of damages on cars, information technologies (IT) during the logistic process and some Car Processing Centers (CPCs) installed into the port.
It is important to remark that since the 4th qtr of 2005 we started working through the Balance Score Card concept, where not only we but the port handling and facilities cessionaries are participating together. We expect to improve the quality of the services and competitiveness.
AI: How much of the ports business is derived from the automotive sector? And how do you see this growing?
Arturo Marin: The automotive sector in 2005 represented to Port of Veracruz 4.2 % of the total tonnage handled; 12.9 % on regards number of Car Carriers (CC) and Pure Car and Truck Carriers (PCTC) arrived to the port (201 vessels). In terms of units, 521,000 cars were moved last year in and out thru the port and 550,000 vehicles are expected to move during this year, which would mean an increase of 30,000 vehicles. Also, in terms of logistics, 4 of every 10 automotives imported by Mexico is going in thru Veracruz; meanwhile 2 of every 10 automotives exported from Mexico is going out thru Veracruz.
It is important to remark that 11% has been the annual growing rate for cars from 2000 to 2005 in the port. However, the growing expectation for the next 3 years is nearly 5 % of increase. I certainly assure that the growing is going to continue gradually in most of the cases. For instance there are some plans form Volkswagen and Nissan to improve their production of new car models for export in the next future.
Now, considering the joined investments in the port area, performed by Cessionaries as private companies and us, as Port Administrator, the expectations to grow up are very positives. On this regard, only API of Veracruz is investing nearly USD $ 70 millions since year 2004 to improve and duplicate the port capacity.
AI: What are some of the new facilities you plan to offer your automotive customers?
Arturo Marin: We realize that current capacity of the port is not good enough for the automotive market demanding, mainly in high season (last quarter of the year). However, with the current facilities operated by cessionaries as well as open areas still managed by the Port Administration which can be leased, we think the port could attend current market, but not for a long time, let’s say in 5 years from now, if we do not do something before. When I say “We” I am not talking only about the Port Administration but also the port cessionaries who are the real port operators and represent the private investors in the port.
According to port master plan 2005-2010 it would be important to have a new car facility into the port. A bid for a new car facility was performed last year, based on a companys request related with the car biz, however, the result was not successful with not winner at the end. We are working more in detail to re-evaluate such bid conditions in order to support a best result and interests form the automotive market. Meantime, we are focusing on new works and projects for the port, like a new port highway exclusively for cargo trucks to avoid the transit thru the city and allow a much better truck flowing with the port and also to work with the rail companies Kansas City Southern de Mexico and Ferrosur to improve their services of bi-levels and tri-levels rail cars.
From the port cessionaries point of view they have plans to improve the services with added value thru CPCs into their facilities.
AI: Give us some examples of new automotive business that the port has garnered thanks to the expansion and renovation plans.
Arturo Marin: The expansion and renovation plans of the port are quite resents and no way show you a fast result on the automotive market: the port highway will be concluding on June 2006; some works on docks are still doing as well as dredging works which will be finished during current year. However, the automotive companies’ reaction to the expansion and renovation plans of the port of Veracruz has been very positive since their plans of market expansion are to improve their volume for export in car units at least during the next 3 years thru Veracruz. Companies like Volkswagen, Nissan and Ford have very aggressive plan to expand their markets with new car models as well as to new destinations.
Since the port of Veracruz handle most of the car mark trade it is very hard to talk about new biz on this segment but only improvements what we already have with a very specific trends and focusing on to improve CPCs concept.
On the other hand it is important to say that CKD market is becoming stronger thru containers.
AI: Where does your competition come from? Other ports in Mexico or other countries? And how do you think you will be able to meet this challenge?
Arturo Marin: There are some ports in Mexico that participate into car handlings like Acapulco, Mazatlan, Manzanillo and Lazaro Cardenas on the Pacific coast which represents 21 % in the market share; Altamira on the Gulf of Mexico, which together with Veracruz represents 79 % of the port market share. However, the port of Veracruz remains as the leader one in market share in this cargo segment. On the other hand, there is some potential market of cars movements done by rail thru cross boarding services that the port of Veracruz could get. There are more than 1.3 million of automotives going both in and out thru above mentioned ports and cross boarder Mexico / USA.
It is very important to improve the quality of the services but not only regarding the services of the port but all of them into the logistic supply, from origins to final destinations. Therefore, to meet this challenge we all the players need to work together to improve cargo handling rates, transit times under the concept of just-in-time, CPC concept which so far the port of Veracruz is the only port offering this service concept in the country, information tech systems; and avoiding damages and any step which does not offer any added value to the logistic chain. The result should be a reduction on costs to keep the market competitiveness. The Balance Score Card method should be a very useful tool to meet this challenge among other action plans.
AI: What are some of the innovations that the port of Veracruz will offer by 2010 that will give it an edge over other ports?
Arturo Marin: The port of Veracruz is currently working on its Master Plan 2005-2010 together with port cessionaries as the port operators and as the private investors, supported on the Balance Score Card concept. It is in that sense what we are evaluating market needs not only up to year 2010 but for many years more. I remind you that as the Port Administrator we have a concession time from Federal Government of 50 years, which means 39 years in remaining from now, plus extra 50 years. Such context could explain what our commitments and challenges are to meet customers’ needs.
According to your question I would answer as follows:
1) Increasing services thru Car Processing Centers (CPC). So far the port of Veracruz is the only Mexican port which offers added value thru this concept. On that sense the port would start with plans and activities in the port reserve land of 300 has., called Logistic Activities Zone, located at North of current port. Such area should used for warehousing or other activity.
2) Improve port services and facilities for automotive market: current installations and facilities, highways, rails, etc. As before mentioned USD$ 70 millions has been invested by Port Administration beside the private investments performed by cessionaries since 2004 to now. It is not easy but not impossible to make another bid for a new car garage. So far the only Mexican port beside Veracruz having a car garage is Acapulco, on the Pacific coast.
3) In 2010 the port of Veracruz could be ready to start with its major project to built a complete new port on the North area, which multiply the port current capacity and should be the second step to follow up after Logistic Activities Zone was running.