Mexico Nearshoring Build-Out
David Hertog@dhertog
+2.9%
since Sep 30
The idea
I think US deglobalization makes Mexico the next factory floor, so this basket owns the build-out in layers: cross-border energy pipelines and LNG as the core, since gas and grid capacity are the bottleneck every new plant hits first, then Mexican industrials, rail and freight, grid equipment, and border warehouse space around it, with a small slice of broader Mexican economy exposure and some cash kept aside. No single name dominates, and I'm thinking years, not quarters, so I'd only walk away if the nearshoring trend itself stalls out.
What it owns
- Mexico's factories need US natural gas to operate, so the pipelines and liquefied natural gas projects moving it south capture the primary constraint on industrial growth. · SempraIt is building liquefied natural gas and gas pipeline infrastructure on Mexico's Pacific coast to supply the country's new factories with US energy., Kinder MorganIt operates major pipelines carrying Texas natural gas to the Mexican border and into the country's manufacturing regions., Energy TransferIt owns the Texas pipeline network feeding the border crossings through which US natural gas flows into Mexico., TC EnergyIt operates pipelines inside Mexico, including lines serving the country's southeastern region, providing direct exposure to the country's gas bottleneck., TenarisIt manufactures the steel pipe used in natural gas infrastructure, with production facilities in Mexico supporting the region's energy build-out.26%
- Cement, steel, and airport operators in Mexico's manufacturing corridor are direct beneficiaries of the factory construction wave. · CemexIt is Mexico's cement producer, supplying the concrete needed for new factory construction, warehouses, and infrastructure., TerniumIt manufactures flat steel in Monterrey's industrial region for the auto plants and factories that nearshoring brings to northern Mexico., Grupo Aeroportuario del Centro NorteIt operates airports serving Monterrey and northern industrial cities, benefiting from increased business travel and cargo tied to factory growth., Grupo Aeroportuario del PacíficoIt operates airports across the Bajío manufacturing belt and border cities like Tijuana, capturing traffic growth from regional factory activity.17%
- Goods manufactured in Mexico must travel north across the border, and a limited set of railroads and trucking companies control those routes. · Canadian Pacific Kansas CityIt operates the only railroad running a single network from Mexico through the US to Canada, capturing cross-border volumes from Mexican production., Union PacificIt handles the largest volume of rail freight crossing the Mexican border, benefiting from increased finished goods shipments northbound., Werner EnterprisesIt operates cross-border trucking from Mexico into the US, serving the freight lanes where goods manufactured in Mexico travel north.16%
- Every new plant requires transformers, switchgear, electrical connectors, and installation crews on both sides of the border. · EatonIt produces switchgear and transformers that every new factory and grid connection requires on both sides of the border., Quanta ServicesIt supplies the construction crews that build power lines and substations, with activity tied to new factory grid connections., HubbellIt manufactures electrical connectors, enclosures, and utility components installed in every mile of new power grid infrastructure.12%
- New factories lease warehouse and industrial park space before they hire workers, so landlords near the border see demand earliest in the build-out cycle. · Corporación Inmobiliaria VestaIt builds and leases industrial parks in Mexico's manufacturing corridors where factories locate and expand operations., PrologisIt owns warehouses and industrial parks on both sides of the border, providing the staging and distribution space goods made in Mexico require.10%
- A sustained factory boom raises Mexican wages and consumer spending, so broader market exposure balances the concentrated sector bets. · iShares MSCI Mexico ETFIt holds the broad Mexican stock market, capturing the general economic benefits that a manufacturing build-out would bring across the country., Fomento Económico MexicanoIt operates convenience stores and beverage operations where workers in Mexico's growing industrial sector spend rising wages.8%
- Cash11%