Logistics Report: Scrapping Bulk Ships; JD.com Pulling Back; Powering Down Smartphones

Date: Monday, April 15, 2019
Source: The Wall Street Journal

The dry-bulk shipping sector at the heart of the global industrial economy is navigating stormy seas. Carriers stepped up their scrapping of the biggest bulk transport vessels in the first quarter, the WSJ Logistics Report’s Costas Paris writes, as shipping rates turned sharply downward in a business marked by heavy pricing volatility. Ship-broker BTIG says ship recycling was up 35% in the first quarter from a year ago, and most of the scrapped capacity came in capesize vessels—the biggest ships that move iron, aluminum and coal from Australia and Latin America to China. The bulk sector is marked by unforgiving economics, and rates this year are down while production in the important Brazil mining market is diminished because of the fallout from Vale S.A.’s dam disaster there. Brokers expect a recovery in shipping rates as output resumes and buyers find fewer ships on the water.

JD.com’s hard-charging growth plan has hit a wall. The Chinese e-commerce company is rolling out wide-scale layoffs and closing most of its offices abroad, the WSJ’s Shan Li reports, casting a cloud over an online retail market that has become a pillar of China’s domestic economic expansion. JD.com is No. 2 to Alibaba Group Holding Ltd. in China, and has charted an aggressive and innovative path that includes heavy investment in a logistics network it says provides a competitive advantage. But the executive ranks have seen critical departures in recent weeks, and cutbacks are hitting the rank-and-file workforce. A spokesman says the company isn’t looking at large-scale layoffs and instead is returning to “our entrepreneurial roots,” including more hiring in logistics. A network of more than 550 warehouses across China has already eaten into profit margins, however, and consumers are turning to low-price competitors.

Supply Chain Strategies

The impact of slipping iPhone sales is reaching deeper into Asia’s bedrock electronics supply chains. An investor group from Taiwan and China plans to take control of the leading Japanese supplier of smartphone displays to Apple Inc., the WSJ’s Takashi Mochizuki reports, potentially providing a fresh lifeline to Japan Display Inc. while setting up bigger changes in its operations. Japan Display is grappling with falling iPhone sales as well as a broader shift to newer organic light-emitting diode, or OLED, displays. The new investor group is led by Taiwanese touch-panel maker TPK Holding Co., which would help Japan Display build up its liquid-crystal-display business. The company also plans to consolidate factories and offices in Japan while building new plants to make OLED panels in China. That would boost Beijing’s efforts to bulk up electronics manufacturing there even as production of low-margin goods shifts to other countries.

 

Commodities

The U.S. metals industry is getting a big boost from a seemingly unlikely source. Russian aluminum giant United Co. Rusal plans to invest $200 million in a Kentucky rolling mill that would be the largest new aluminum plant built in the U.S. in nearly four decades. The WSJ’s Bob Tita reports that startup Braidy Industries plans to open the plant next year in Ashland, Ky., in the biggest investment in the domestic aluminum industry since the Trump administration imposed a 10% duty on imports of the metal last year. The plant would also draw more imports into the U.S. because the mill would roll aluminum slabs from abroad for use by the auto industry. The investment by one of the world’s largest metal companies reflects a changing aluminum market, with U.S. companies pivoting away from production for cans and other consumer staples toward higher-profit aluminum-sheet for vehicle bodies.

 

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