Logistics Report: Freight Rates Sinking; Apps Eating Profits; Steelmakers are Rolling
Date: Friday, February 8, 2019
Source: The Wall Street Journal
Shipping rates in maritime’s dry-bulk sector are in freefall. Declining demand in China and Brazil and slowing economic conditions worldwide have dragged down prices for hauling iron ore and other commodities, the WSJ Logistics Report’s Costas Paris writes. The Baltic Dry Index, which tracks the cost of moving bulk commodities, is down more than 50% since the start of the year as operators face the lowest demand they’ve seen in two years. It’s not unusual for demand to slow this time of year as China’s Lunar New Year holiday shuts down factories and businesses nationwide. But trade tensions between China and the U.S. and the Vale iron ore disaster in Brazil have created new sources of uncertainty for bulk ship owners. China agreed last week to purchase 5 million tons of soybeans from the U.S., but operators need a stronger global economy for a true rebound.
Food-delivery apps may be making it easier for people to get meals delivered but they’re giving restaurants heartburn. The WSJ’s John Stoll writes that although DoorDash, Grubhub, Postmates and the like are helping restaurants reach stay-at-home customers, the services can scramble restaurant economics and the logistics for full meals remains daunting. Delivery services can command as much as 40% of the revenue earned on a sale, leaving little for the owner of the kitchen that prepared the meal. The tech firms are often valued by investors as high as major restaurant chains—something Postmates is banking on as it announced it’s filed to go public. The market gets a lot of attention with its 6% growth last year. But delivery still only accounted for 3% of sales, leaving the delivery-app model undercooked.
U.S. steel producers are using new tariffs to forge expansion plans. Nucor Corp., Steel Dynamics Inc. and a half-dozen other companies are adding 16 million tons of steelmaking capacity in the U.S., the WSJ’s Bob Tita reports, amounting to an 18% increase over the 90 million tons they produced in 2017, before tariffs took effect. They may be placing an expensive bet: Demand for steel has been weakening, sending prices lower and raising the risks for U.S. companies planning to produce more, even as imports continue to account for about 25% of U.S. steel supply. Steelmakers say they’re not worried, with plans to target customers that currently buy imported steel and modernize their plants to operate at lower cost. John Hritz, CEO of the U.S. unit of India’s JSW Steel Ltd., said, “We’ll be fine.”
The U.S. Justice Department wants answers from bankrupt freight payment company IPS Worldwide LLC. A government watchdog says more than $100 million is unaccounted for at the company, the WSJ’s Tom Corrigan reports, and wants the U.S. bankruptcy court to appoint an investigative examiner to track down the funds. The request marks a new twist in a bankruptcy case that has stirred up a quiet but critical corner of the supply chain. IPS processes more than 35 million invoices annually worth more than $8 billion. Its bankruptcy filing last month alarmed creditors, including Stanley Black & Decker Inc., Alcoa Corp. and trucker YRC Freight, with Stanley accusing IPS of misappropriating cash they thought was going to pay freight-haulers. An IPS lawyer acknowledges “missteps” but says there’s no evidence to support those allegations. A judge is expected to decide whether to appoint an examiner next week.