Katoen Natie: Sustainable Logistics, Strategic Growth

Q: With operations in 40 countries, what strategies does Katoen Natie employ to ensure consistent quality standards, health, safety, and environmental protection across its global operations?

A: Katoen Natie is a global company with logistics as its core business, structured into different business units to serve various markets. For instance, we have engineering units focused on developing our equipment, terminals, and infrastructure for clients, as well as specialized chemical and petrochemical units. Notably, our petrochemical unit is one of the bigger units of the group. We also manage port operations worldwide, such as in Uruguay, and have units for consumer goods, e-commerce, art, and general cargo.

Our structure, with distinct business units, ensures each has a director who oversees operations. Specifically, in petrochemicals, we maintain global standards through the development of global policies and procedures. This approach combines local autonomy with corporate oversight. Each terminal can develop procedures based on local needs but must adhere to our global guidelines on best manufacturing practices. These practices are reflected in service level agreements approved by clients and monitored through audits and visits by our management teams. This predefined global service formula ensures all terminals align with established practices while allowing for local adaptations as needed, under corporate supervision.

Q: Among the array of services provided by the company, which ones witness the highest demand?

A: Globally, our petrochemical unit is very stable and continues to grow, though not as rapidly as before since it is now a well-established demand. However, our Consumer Goods unit, especially e-commerce, has seen a significant surge since the pandemic. This unit has expanded rapidly in Europe and is now making inroads in the United States with the opening of new warehouses.

In Mexico, we currently only operate in the petrochemical sector, but the growth in the Consumer Goods unit globally, particularly in the United States, suggests that this service might be introduced in Mexico within the next two to three years. As nearshoring trends continue, we are seeing increased interest from new clients and greater demand for our services. This growth brings challenges, such as the need for adequate electricity supply to support new infrastructure.

We are witnessing tangible benefits from these trends, and as companies aim to be closer to the United States market, investments in Mexico will likely continue. This will benefit the entire supply chain, affecting not just one sector but the broader industrial landscape in Mexico.

Q: Katoen Natie emphasizes its commitment to sustainability, including investments in green energy and CO2 reduction. How do these initiatives integrate into the company's overall business strategy and operations?

A: Globally, Katoen Natie is aligned with ESG objectives and has integrated specific goals into our organization. We have a gradual implementation plan focusing on sustainable energy investments. For example, in Europe, many of our warehouses operate with solar panels and wind turbines. A standard practice worldwide is the use of LED lighting in all our warehouses, a transition completed over the past three years, significantly reducing energy consumption and increasing durability. We also use automation to ensure lights only turn on where needed, such as when forklifts are in use, preventing unnecessary energy usage.

Additionally, we have quarterly reporting requirements for energy and water consumption, the types and numbers of forklifts (diesel, gas, or electric), and plastic waste generation. These reports ensure that our sustainability efforts are measurable and impactful. By focusing on concrete metrics, we can effectively track our progress and make data-driven decisions to enhance our sustainability initiatives.

Q: What is the significance of Katoen Natie being the only logistics company in Mexico with the Blue Badge certification in Operation CleanSweep? What commitments does this certification entail, and how does it align with the company's sustainability objectives? 

A: The Blue Badge certification under Operation CleanSweep is a significant achievement for Katoen Natie as it underscores our commitment to environmental protection, specifically in preventing plastic pollution in the oceans. This global initiative, originating from petrochemical producers, aims to prevent plastic pellets from contaminating marine environments. By adopting these best practices, Katoen Natie has demonstrated leadership in sustainability within the logistics sector.

In Mexico, our adherence to this program is particularly notable as we are the only logistics company with this certification, joining other certified organizations like Petstar (Coca-Cola’s) recycling plant , Braskem Idesa, Dart y Zeller Plastics. The National Association of the Plastics Industry (ANIPAC) adopts this  program, known as "Zero Pellet Loss," which is part of the broader Operation CleanSweep initiative and focuses on proper plastic disposal to prevent marine pollution.

Our certification requires us to submit annual reports on our CO2 impact, waste management, and plastic disposal practices, ensuring transparency and accountability. Additionally, we actively engage in social impact actions, such as organizing beach clean-up campaigns in Coatzacoalcos, Veracruz, and cleaning Lake Guadalupe in Cuatitlan Izcalli. These activities not only reinforce our environmental commitment but also educate and raise awareness within our organization and the broader community.

Q: What role does the government's actions to revive railway projects impact Katoen Natie's operations and strategic planning? 

A: The revival of railway projects has a significant impact on Katoen Natie's operations in Mexico. Most of our terminals are rail-served, with 70-80% of the plastic resin volumes transported by rail. Rail transport is crucial for moving large volumes of bulk plastic products efficiently, especially from major petrochemical production areas in the United States, like Houston. Rail is more economical and environmentally friendly compared to trucking, which would require multiple trucks and generate higher CO2 emissions.

However, the railway system in Mexico has limitations. There are only two major players: Canadian Pacific Kansas City and Ferromex/Ferrovalle, offering limited options for service flexibility. Service quality and reliability are concerns, especially with the recent increase in migrant activity. Migrants often travel north by train, causing disruptions in rail services. There is a lack of specific regulations to manage this issue, affecting the overall flow of goods.

Security is another challenge. Although rail transport is generally safer than road transport, theft remains a concern. The government is taking measures to address this, but it's an ongoing issue. With the rise of nearshoring, the current rail infrastructure's adequacy to handle increased industrial activity is a key question. There is also talk of passenger trains sharing cargo tracks, which could further complicate logistics.

Q: How does Katoen Natie navigate challenges related to nearshoring, such as changes in transportation routes, increased demand for certain services, or regulatory differences across regions?

A: At Katoen Natie, our processes are heavily based on meticulous planning and forecasting, which are critical in logistics. We work closely with our clients to understand their upcoming demands, not just for the current month but for the months ahead. This proactive approach allows us to anticipate and manage changes effectively.

For instance, we collaborate with rail operators to assess potential saturation points and adjust the inventory levels accordingly. If we know that rail services will be reduced from four times a week to twice, we plan to increase our stock levels.

Q: What role do partnerships play in Katoen Natie's approach to providing logistics solutions, especially in response to government incentives and nearshoring trends?

A: Partnerships are crucial in our logistics operations, particularly with the rail industry. While we do not directly contract rail freight—the producers do—we must collaborate closely with rail operators like CPKC and Ferromex. This collaboration is essential for maintaining a smooth flow of goods into our terminals and ensuring efficient processing and distribution.

These partnerships are not about economic incentives but about mutual benefits for the entire logistics chain. Effective collaboration with rail operators ensures that volumes are handled correctly, benefiting producers, the rail industry, and our operations. By working together, we can anticipate and minimize disruptions, ultimately supporting the industry's overall efficiency and productivity. Maintaining strong relationships with key players like CPKC and Ferromex helps us stay proactive and responsive to potential impacts, aligning with government incentives and nearshoring trends.

Q: How has Katoen Natie implemented any innovative approaches or technologies to enhance its services and address the specific needs of clients impacted by nearshoring?

A: At Katoen Natie, we continuously develop and implement advanced technologies to improve our logistics services and meet the specific needs of clients affected by nearshoring. We have dedicated Business Support Group Teams focused on engineering and technological innovations. These teams support us by developing smart equipment and systems that enhance the efficiency of our terminal operations.

Our technological advancements go beyond basic solutions like barcodes or QR codes. We invest in intelligent equipment that maximizes operational efficiency with minimal resource usage. This approach allows us to handle larger volumes more effectively and offer competitive pricing to our clients.

We are committed to continuously improving our engineering processes to benefit the entire logistics chain. Our innovations often start in Europe or Singapore, where we pilot new technologies. Once proven effective, these solutions are implemented globally, ensuring our operations are optimized worldwide. This ongoing commitment to engineering excellence helps us deliver more efficient, cost-effective logistics solutions for our clients.

Q: From Katoen Natie's perspective, what are the key opportunities present in the current logistics landscape, particularly in regions affected by nearshoring?

A: The key opportunities in the current logistics landscape, especially in regions impacted by nearshoring, revolve around the arrival of large industries and their demand for high-quality, competitively priced services. One of our main challenges and opportunities is to provide operations that meet these high standards while remaining cost-effective.

To capitalize on these opportunities, we are evaluating to expand our operations. The northern region of Mexico, particularly Nuevo Leon, is an attractive area for us. We are currently exploring projects in this region to take advantage of the nearshoring trend. Additionally, our central Mexican terminals have sufficient land for expansion if needed, allowing us to scale our operations in response to demand.

The petrochemical sector remains a significant focus for us. With the ongoing construction of large petrochemical plants in the United States, expected to continue for the next 12 years, there will be a substantial increase in the production of plastic resins. This growth will naturally benefit the Mexican market, as various industries, including automotive, will require plastic packaging, further boosting demand.

Q: Recently Katoen Natie made a significant investment in Mexico’s logistics sector. How does Katoen Natie envision this investment contributing to the growth and development of its operations in Mexico and the broader logistics landscape? 

A: One of our company's advantages is our preference for ownership rather than leasing. We believe in buying the land, constructing the facilities, and operating them. This approach ensures stability, as we are not subject to rental price fluctuations or the risk of eviction if a landlord changes. It solidifies our market presence, as these terminals are wholly owned by us.

As of now, we have invested US$67 million, and we are aiming to finalize the Monterrey project decision by 2024. Monterrey is a crucial point for us, especially considering the nearshoring trend. We are focusing on consolidating our existing sites and seeking expansion opportunities.

In the following year, we aim to be ready to accommodate additional volumes, which will likely require a heavy investment.