Port delays, storage issues and increased inspections pushed US Gulf coast clean products exports to Mexico away from waterborne routes and toward truck and rail in April and May.
Of the 197,000 b/d of diesel exported from the US Gulf coast to Mexico in April, waterborne volumes accounted for just 28pc, according to export data from the US Energy Information Administration (EIA) and waterborne estimates from oil analytics firm Vortexa.
Overall clean products exports from the US to Mexico shrank to multi-year lows in May.
Although overland exports have encroached on waterborne volumes over the past few years, April’s level represents a new low. In March, around 67pc of US Gulf coast diesel exports to Mexico were waterborne, EIA and Vortexa data show.
In gasoline, approximately 63pc of the 330,000 b/d total April flows from the US Gulf coast to Mexico were waterborne, down from 71pc in March, Vortexa and EIA data show.
Overland exports rose as shipping via truck or rail bypassed a string of logistical and bureaucratic hurdles facing waterborne imports.
Overall US exports to Mexico fell in April following a surge in March, when low outright prices stoked buying interest in Mexico. By April, most of onshore storage tanks were filling up, and a lack of tankage at Mexican ports caused ullage issues and prevented cargoes from discharging. Many of these cargoes effectively became floating storage, which helped push clean freight rates to record highs.
But importers in Mexico continued to favor overland transportation in May, even after port delays eased and freight rates came off.
This is partly because cargo imports faced stricter inspections in Mexican ports in recent months, especially for private-sector, non-Pemex companies.
“Vessels transport has decreased a lot,” said Edgar Martinez, commercial director of Mexican energy freight and logistics firm Grupo Unne. “The government has put certain blocks for private-sector imports, particularly in ports and derived from some bad practices — such as passing diesel off as ethanol to avoid taxes. The government is now taking much more time in its tax inspections at ports.”
Legal loopholes have allowed irregular sales of ethanol in Mexico, and the biofuel pays no excise tax as do fossil fuels.
Truck and rail cars — with their smaller volumes and lead times — also provided a more flexible option amid demand uncertainty. Gasoline and diesel demand decreased quickly by 40-60pc from March to April because of Covid-19 restrictions, and retailers foresee a slow recovery to previous levels, Martinez said. State-owned Pemex has also pressed to increase output at its refineries while most producers globally were cutting rates, complicating imports demand forecasts.
For May, waterborne exports may have increased slightly, according to preliminary data from the US Census Bureau that do not break out the US Gulf coast. The US exported 147,000 b/d of gasoline to Mexico in May, according to census data. Around 68,000 b/d, or less than half, of these barrels were exported via waterborne cargoes, Vortexa data show. Waterborne diesel accounted for 32pc of the 136,000 b/d total in May, according to Vortexa and Census data. The EIA does not publish May data till the end of July.
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