Railroads move to create more access between Mexico, Texas, US Southeast

Aiming to keep up with competitors in road and sea transportation, three major freight railroads announced plans to create a new trade route for shippers connecting Mexico, Texas and the U.S. Southeast.

Canadian Pacific Kansas City (CPKC), CSX and Genesee & Wyoming railroads aim to establish a direct CPKC-CSX interchange connection near Myrtlewood, Alabama, providing shippers with rail access to new markets.

The deal would also improve CSX’s access to Mexico.

“CSX is excited to establish this new interchange connection with CPKC, which provides shippers with a compelling transportation option with access to markets in Texas and Mexico, as well as into the heart of the thriving and dynamic U.S. Southeast,” Joe Hinrichs, CSX president and CEO, said in a news release.

As part of the series of the proposed transactions announced Wednesday, CPKC (NYSE: CP) and CSX (NASDAQ: CSX) will each acquire or operate portions of the 168-mile Meridian & Bigbee Railroad (MNBR), a Genesee & Wyoming Inc.-owned railway in Mississippi and Alabama.

“This strategic acquisition will bring more shipping options to intermodal, automotive and other customers by providing a new, efficient corridor,” Keith Creel, CPKC president and CEO, said in a statement. “With this new east-west connection taking advantage of each railway’s routes and service, we can extend our reach, converting more freight traffic to rail and off our highways.”

Terms of the transaction were not disclosed. Portions of the transaction are subject to regulatory review and approval from the U.S. Surface Transportation Board.

The MNBR rail line currently runs between Meridian, Mississippi, and Montgomery, Alabama, and is overseen by a combination of ownership and operating agreements.

Under the deal proposed Wednesday, CPKC would acquire and operate the segment of the MNBR between Meridian and Myrtlewood, and CSX would operate the lines currently leased by MNBR east of Myrtlewood.

CPKC and CSX would establish a direct CPKC-CSX interchange at or near Myrtlewood. In exchange, G&W would acquire certain Canadian properties owned by CPKC and other rights.

MNBR would receive rights to continue to provide local service to existing customers on former MNBR-owned lines and connect with other railroads without interchange restrictions.

“We are pleased to have entered into agreements with CSX and CPKC that will enable MNBR to continue providing customers with outstanding short line service, while enabling our Class I partners to create a new connection into the Southeast U.S.,” Jack Hellmann, CEO of G&W railroad, said in a statement.

“At the same time, we have enhanced several agreements related to other G&W short line railroads and are collaborating on the expansion of our service to Alberta, Canada, and the Alberta Industrial Heartland in conjunction with CPKC.”

For CPKC, it’s one the latest moves as the railroad bets big on Mexico cross-border freight.

CPKC recently expanded its Mexico cross-border capacity with the addition of 1,000 53-foot refrigerated intermodal containers.

In April, CPKC announced agreements with Schneider National and Knight-Swift Transportation for intermodal services using the company’s Mexico Midwest Express daily premium single-line intermodal rail service.

Rival railroad CN (NYSE: CNI) announced in April a partnership between Union Pacific (NYSE: UNP) and Mexico railway Ferromex to offer a transcontinental intermodal service.

CN has also said it is partnering with maritime and logistics services company Crowley to provide integrated rail and ocean service between Mexico and the U.S. Midwest and Canada via the Port of Mobile in Alabama.