In this blog, Nick Smith, MRC’s Director of Sales & Marketing, shares his thoughts on the current state of the U.S., Canada and Mexico markets and what the future holds for them.
Nick: When it comes to shipping railcars in different countries, there are a lot of commonalities, but there can be a few differences. Some things that we take into consideration are taxes, additional certifications or maintenance access. Additionally, each country has their own regulatory body, which pushes us to be thorough in our decision-making.
Transit times, maintenance and equipment cycling differ significantly by region. Railcar utilization and dwell times also vary by country, which can affect lease economics. For example, the U.S. has a dense network with multiple Class I railroads and short lines. There’s also a high availability of repair shops and leasing pools.
Both Canada and Mexico have two Class I railroads that handle their traffic. Canada has long-haul corridors and harsh winters that can affect velocity and equipment utilization. Mexico has fewer repair facilities and can have congestion at key border gateways.
Today, MRC has a fleet of just under 10,000 rail cars. We have some growth targets that plan to exceed 15,000 rail cars in the coming years, which is really exciting. But with that comes opportunities to expand our customer base and the markets that we serve.
In the last two years, we’ve deployed over $200 million of capital in new builds and secondary acquisitions, growing our footprint in both the Canadian and Mexican markets. Being nimble and flexible in our offerings and decision-making allowed us to quickly adapt to various changes presented last year.
We look forward to more economic stability of the countries governed by the USMCA, which will enable us to continue to assist our customers and reach our growth targets.
Generally speaking, our customers are doing a little bit of both. For example, in 2024, Canada shipped approximately 220 million tons that stayed within Canadian provinces, while approximately 140 million tons was either exported or imported.
That means that about 60% of their traffic stays domestic and 40% is either imported or exported. Mexico’s numbers, on the other hand, are almost opposite, where almost 105 million tons or about 70% of their rail traffic is exported, while the other 40 million tons or 30% of traffic stays domestic.
For MRC, it has been pivotal for us to stay on top of market trends as we look to continue with our customers.
MRC has a great team that has a ton of experience in rail and rail car leasing. This allows us to have a deep understanding of our customers’ needs and provide them with informed solutions.
We have a well-maintained and modern fleet with an average age of just under 12 years old.
This allows our customers to lease equipment that is reliable and minimizes concerns over maintenance and repairs. In the instance that something does go wrong, MRC has relationships with shops all across North America that allow our customers to get back on track in an efficient and cost-effective manner.
By us not owning shops, we can work with our customers to find shops that are close in proximity and have a reputation of doing quality and efficient work. Lastly, we pride ourselves on our responsiveness and ability to quickly get deals done with our customers.
We do this by listening to our customers and rapidly finding solutions that continue to allow us to partner and further strengthen our relationships.
MRC is looking to continually grow through capital deployment while bringing on the right type of equipment that fits our customers’ needs. That also means continuing to diversify our fleet so that we have the right equipment at the right time. If you were to look at our fleet five years ago, we were about 20% tank cars and 80% freight cars.
With the investments we’ve made on both the freight and tank side, including new builds for meal hoppers, various tank cars and gondolas, we are now about 70% freight cars and 30% tank cars. Our mission at MRC is to invest in capital in a well-maintained and diversified fleet, therefore allowing customers to free capital and focus on their core competencies.
For Mexico, we think primary metals, finished vehicles and grains will be growth markets in the future. For Canada, we saw commodities like lumber and steel be impacted by tariff changes.
As those markets rebound, MRC is prepared and aligned with our customers to grow. Lastly, we feel like intermodal traffic will be a growth engine in all three countries.
Want to listen to the 5-minute interview?
Click here for Nick Smith’s insights on the current state and future outlook of the U.S., Canada, and Mexico markets.
