Once he gets those cars across the Rio Grande into Matamoros, Kansas City Southern de Mexico (KCSM) gets those cars down to Queretaro, 115 miles northwest of Mexico City, in 30 hours or less.

The logistics problem arises once the cars get to Queretaro. There are no track-side liquid loading-unloading facilities in Queretaro or pretty much anywhere else in Mexico. What’s the shipper supposed to do once the cars are delivered to him in Queretaro?

The first expedient is to go to the local terminal of Bulkmatic de Mexico, the master of “transloading” freight from railcars to trucks. BDM was founded in 1996 and built around transloading polyethylene pellets from hopper cars into trucks or customer manufacturing facilities.

Bulkmatic has 11 transloading terminals across Mexico, including four down the centerline of KCSM. The big one is in Salinas Victoria (Monterrey), and they have space for 120 cars in San Luis Potosi, 120 in Queretaro, and 387 at a big yard just east of Pemex’s largest refinery in Tula, Hidalgo.

But importers tell OPIS that Bulkmatic is a slow and costly option. It’s fine if you’re only doing three to five cars a week, but when volumes climb toward 20 cars a week, a more economical solution is warranted.

So one importer bought his own transloader for $145,000 and stuck it on a side-track near Queretaro. When his volumes rose toward 20 cars a week, he got the volume discount on his second transloader for a price of $100,000. It’s a slow process. With two transloaders, he’s got two transload operators working round-the-clock six days a week to unload 20 cars.

As an economic proposition, it works versus the charges he would have to pay Bulkmatic to get the cars unloaded. But, in the big picture, “I’m still not making a dime on LPG imports, and I haven’t even spent the $3-5 million it would cost for a side-track and a simple holding-tank terminal that could offload 13 cars in a fast and efficient manner.”

Admittedly, his problems commenced around July 1 when Pemex lowered the boom on private importers and slashed rack prices to propane distributors by 24%-27% (OPIS, July 7). No matter how adroit his LPG purchases in the U.S., he can’t match the discounted Pemex prices, which leads him to conclude that Pemex isn’t covering their own costs for LPG imports either.

So there’s no money in the import game right now. But anyone staying at it in the face of the Pemex discounts is obviously playing a waiting game. No one believes that the Pemex discounts will last through the winter, and Pemex is under no obligation to its customers to maintain them. The people still doing imports are staking out a position in both supply from U.S. sources and in the logistics of bringing it to market in Mexico.

The problem with transloading, one logistics expert told us, is that you’re going straight from the railcars to truck loading. Typical railcar capacity is 30,000 gal of LPG, three transport loads of 10,000 gal each. The railcars serve as rolling bulk plants, waiting until a transport has discharged its full load and needs to fill up again.

All this waiting leads to interminable delays for the railroad rolling stock, and that can get expensive in a hurry. Our expert source says you have five days to unload a railcar and then you get hit with demurrage charges of $75 a day per car. There’s another charge called “detainage” which wasn’t clear to us, but it’s also $75 a day, which means the delays could be costing $150 a day.

Faced with the slow, cumbersome, expensive logistics of transloading, one project developer told us it was imperative to build real offloading terminals that could unload a string of tankcars efficiently into holding tanks that would serve as in-transit storage until it could be loaded onto transport trucks. The ideal would be to bring in a string of 10 cars, say, every 7-10 days, unload your tanks in that time, and be ready for the next tankcar string in a regular rotation.

His point is that he envisions these terminals as elementary, basic and cheap. All he wants is a side-track to park his tankcars on, tanks to unload them into, and a two-spot truck rack with enough pump horsepower to load the trucks efficiently. Turnkey capital cost including land and track capacity might be in the $3-5 million range.

Yes, this is a mighty big bet compared to the shoestring operation with two transloaders for $250,000, but this bet would position you as a significant product source in a defined region. Going in the other direction, his little side-track terminal is also a far cry from the $100 million terminal going up in San Luis Potosi for Sonigas with four 20,000-bbl spheres.

His point is, he wants to start slow and conservative, and yet still have a facility adequate to meet real demand for a significant territory. He says a decent rule of thumb for LPG tankage is $5.00 per gallon of capacity. Standard sizes for bullet-tanks, or “salchichas” (sausages), in Mexico are 33k-gal, 66k, and 99k-gal. So a jumbo 99k-gal salchicha would cost roughly $500,000, and four jumbos would cost around $2 million. That kind of capacity at track-side would allow unloading 13 cars in short order.

So what’s stopping him? Well first, like the transloader says, you can’t make any money at it right now. When prices go back up to a sustainable level, he is convinced there will be plenty of money in it for a dependable, efficient supplier. The problem is, he can’t get Mexican retailers to sign a term deal for a steady supply over 12 months. Supply has always been hand-to-mouth, direct from Pemex, and it’s not clear that they will no longer be able to rely on Pemex for constant supply.

In the big picture, nothing will get built until the customers are ready to put up serious money to get things built. That’s how Enterprise and Targa built the giant LPG export terminals in Houston — with term-commitments that they could take to their bankers. That’s what it will take to build a string of regional track-side LPG terminals around Mexico.