Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: Concern for China’s supply dominance of rare earth metals; CEVA Logistics to operate a warehouse for IKEA in Mexico; Coca-Cola FEMSA acquires 45 Kenworth trucks; Nikola’s new factory to rely on cross-border supply chain.
Survey shows concern for China’s supply dominance of rare earth metals
Reducing the supply reliance on China’s domination of strategic metals is a concern for many manufacturers across the United States, according to a recent survey by Almonty Industries Inc.
Almonty (OTCMKTS: ALMTF) conducted the online survey in June 2020, querying around 150 business executives across U.S. industries such as construction, automotive, technology manufacturing, building products and electrical components.
The companies were asked about their views of the part of the supply chain having to do with rare minerals and metals, including tungsten, indium, tantalum, barium, germanium and phosphorus.
“It’s a perilous time for U.S. manufacturers to be facing a constrained supply chain of precious and strategic metals that are so important to industry, business and consumer uses today,” said Lewis Black, president and CEO of Almonty Industries. “COVID-19 has placed unwanted economic pressure on many U.S. manufacturers, on top of the China-U.S. trade war that was already placing difficult price and financial strains on U.S. industries.”
Almonty Industries is a global mining company focused primarily on tungsten mining. While the company’s headquarters is in Toronto, the company has mining operations in Spain, Portugal and South Korea.
According to the survey, 26% of executives source their strategic metals from Vietnam/Pan Asia, while 20% are sourcing from China, Mexico and South America. However, China remains a major sourcing location, with 20% of companies saying they get as much as 40% of all their strategic metals from China.
“Mexico was quite a surprise in the survey,” Black said. “There’s a lot of silver that comes out of Mexico and tin.”
Mexico traditionally has been one of the largest silver producers in the world and is a significant producer of gold, as well as raw metals, such as copper, zinc, manganese and lead, according to Mexico’s economy ministry.
In 2019, Mexico’s mining sector received $606 million in foreign direct investments. In comparison, China’s mining sector received more than $124 billion in foreign direct investment in 2019, according to the Chinese Ministry of Commerce.
China controls the market for nearly 35 raw minerals and metals that are important to U.S. manufacturers, including tungsten, one of the rarest metals on Earth.
“Eighty to 85% of the world’s tungsten production is done in China,” Black said. “It’s not found in many other places. It’s normally very low grade in the other places where it is found, and it’s normally found in places that you perhaps don’t want to operate in.”
Tungsten is used in everything from components in construction tools, airplanes and automobiles, to everyday items such as lamps, transistors and electrodes used in iPhones.
More than 63% of respondents said it is detrimental to their business that China controls so much of the supply of precious metals. Seventy-four percent said the greatest threat to their manufacturing business over the next 12 months would be supply chain disruptions and constraints.
Black said it’s an important time for companies to be reconsidering their supply chains, because the coronavirus is the biggest worldwide crisis since the global financial crash of 2008.
For Mexico to expand foreign investment in its mining sector, Black said the government needs to improve the legal system by strengthening the enforceability of contracts.
“I think any supply chain needs to know that if they make a contract, it’s enforceable locally, that it can’t just be abandoned if it doesn’t fit the current government or the previous government or changed on a whim, which is important,” Black said.
Black added that Mexico, as well as South American countries, need to adopt “the equator principles,” an agreement from some of the world’s top banks to meet environmental and social-impact standards when financing infrastructure projects.
“Project finance banks use what they call the equator principles, which is a way of assessing the social and environmental issues and how to address them at site. I think this is what Mexico, South America really has to get to grips with it,” Black said. “You have to now be in compliance with international standards.”
Coca-Cola FEMSA acquires 45 Kenworth trucks
Coca-Cola FEMSA recently added 45 Kenworth T880 tractor trucks to its fleet.
Mexico City-based Coca-Cola FEMSA is the bottler of Coca-Cola and its related soft drink products in Mexico and Latin America.
The new trucks will be focused on providing primary distribution services to Coca-Cola FEMSA plants in the Mexican cities of Toluca and Cuautitlán that supply the company’s distribution centers in central Mexico.
The new trucks are equipped with EPA 17-certified engines that are aimed at being more environmentally friendly, reducing the emission of nitrogen oxides (NO and NO2).
The trucks were manufactured at the Kenworth Mexicana plant in Mexicali, Mexico.
CEVA Logistics to operate a warehouse for IKEA in Mexico
CEVA Logistics Mexico has been tapped to operate a new dedicated warehouse to support IKEA Mexico’s operations in the country.
The Mexico City IKEA Store will become the company’s first retail location in Mexico. CEVA has been awarded a multiyear contract to operate it.
CEVA will be responsible for all operational activities of the new CEDIS (Distribution Centre). CEVA will utilize its Matrix IT platform to manage all the warehouse processes.
“We are delighted to have been awarded this long-term contract with IKEA Mexico. This is testimony to our expertise in customer and retail logistics and to our dedication,” said Dominik Dittrich, CEVA’s executive vice president of contract logistics, North America.
Nikola’s new factory to rely on cross-border supply chain
Nikola Corp.’s (NASDAQ: NKLA) new plant in Arizona will benefit from its proximity to Mexico’s auto manufacturing supply chains, said Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry.
The new plant will be located in Coolidge, Arizona, around 133 miles from the Nogales Port of Entry at the U.S.-Mexico border.
Nikola broke ground on the new electric vehicle plant on July 23. The 1 million-square-foot manufacturing facility will create 2,000 direct jobs.
“In emerging sectors like electric vehicle manufacturing, the Arizona-Sonora, Mexico, relationship is a key driver for major investments in Arizona,” Hamer said, according to news outlet AZbigmedia. “For both Lucid Motors and Nikola Motors, the auto part supply chain between the two states was a major factor in winning the hyper-competitive manufacturing investments in Pinal County.”
The first phase of the plant’s construction is scheduled for completion in late 2021, with the second phase projected to be complete within the following 12-18 months.
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