Logistic Report: Tensions at Terminals; Warehousing's Big Squeeze; Mexico’s Tanker Backup

Date: Wednesday, January 16, 2019
Source: The Wall Street Journal

Big shifts in trade and shipping trends are crashing together at the Port of Hong Kong. The city’s antitrust watchdog is investigating cartel allegations against the port’s biggest terminal operators, the WSJ’s Costas Paris and Joanne Chiu report, in a sign of how Hong Kong’s receding role in global shipping is creating conflicts on the docks. The antitrust investigation is over plans by the port’s top four terminal handlers to work together under an alliance that would operate berths controlling 95% of Hong Kong’s container volume. The operators aim to get more efficient, but the big goal is to reclaim container business that’s been lost to other fast-growing Asian gateways, particularly China’s big seaports. The new response at Hong Kong’s docks is creating a showdown between the terminal operators and cargo owners who say the strategy is simply a monopoly aimed at driving up costs for shippers.

Warehouse developers simply can’t build fast enough to catch up with demand. The availability of industrial space fell to its lowest point since 2000 in the fourth quarter, the WSJ Logistics Report’s Jennifer Smith writes, and the gap between demand and supply grew wider in the second half of the year. Real-estate brokerage CBRE Group Inc. expects the imbalance that’s driven up the costs of warehousing in recent years will eventually turn around. But a market driven by the changing distribution patterns behind e-commerce shows few signs of cooling even in the seemingly late stages of a strong business cycle. That move toward equilibrium between supply and demand will likely take even longer in some of the country’s busiest distribution markets. CBRE says the availability rate in Los Angeles, nearby Orange County, Las Vegas, New York and eastern Pennsylvania remains far below the national average.

Commodities

A change in energy policies from Mexico’s new government is triggering disruption and shortages across the country’s oil supply chains. Mexico has scaled back imports of U.S. gasoline since President Andrés Manuel López Obrador took office Dec. 1, the WSJ’s Robbie Whelan and Rebecca Elliott report, leaving tankers backed up at Mexico’s Gulf Coast fuel terminals and frustrated drivers queuing up for hours at gasoline stations. At least 15 tankers were idling in the Gulf waiting to unload million barrels of gasoline in recent days, apparently the result of the president’s decision to shut down several key pipelines that carry the fuel inland from coastal terminals and refineries. The move is meant to combat fuel theft that cost state oil firm Pemex roughly $3 billion last year. It’s also exposed the fragile supply chains behind a commodity that is a major force in Mexico’s economy.

Supply Chain Strategies

A big supplier is raising high-stakes alarms over a struggling U.S. retailer. Pharmaceutical giant McKesson Corp. says regional retail chain Shopko is closing stores, stiffing suppliers and likely headed to bankruptcy, the WSJ’s Peg Brickley reports, in the latest example of tensions between suppliers and storeowners in a changing retail sector. McKesson is heavily exposed to the troubles at a chain with some 360 outlets spread across 26 states. The company shipped around $60 million in drugs to the stores last year, and McKesson’s concerns highlight the challenges suppliers face as some retailers struggle. McKesson is worried about Shopko’s plan to sell some of its pharmacy stores to other chains to pay down debt. That would make it harder for the pharma provider to reclaim its products under the formal bankruptcy process that gives fast-acting suppliers priority rights to the goods and revenue.

Quotable

“The big challenge of e-commerce is not the big warehouses holding products and making sure orders are made, but the cost is in that last mile of delivering objects.”

— Keith Weed, chief marketing officer at Unilever PLC.

Number of the Day

4.9%

Annual decline in U.S. and Canadian rail shipments of lumber and paper products in December, according to the Association of American Railroads, the third straight monthly decline.

 

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