Logistics Report: Shipping’s Gathering Clouds; Seeking Trans-Pacific Accord; Amazon to Market
Date: Monday, March 4, 2019
Source: The Wall Street Journal
The container shipping sector is setting plans for the crucial busiest part of the year amid new concerns that undermine the industry’s hopes for a long-awaited sustained rebound. From rising fuel costs to capacity increasingly out of step with demand, vessel operators face new market and regulatory challenges to raising profitability over the next two years, the WSJ Logistics Report’s Costas Paris writes in a Shipping Matters column. Shipping companies will try to pass on to cargo owners an estimated $10 billion a year to cover the higher cost of cleaner-burning fuel, but carriers will likely have to absorb some of those costs to keep customers on board. One analyst writes that “irrational behavior with price competition remains the key risk factor” for shipping lines. Supply and demand may be a bigger concern, with growth of global trade flows ebbing just as more megaships are due to hit the waters
An agreement between the U.S. and China is taking shape that could lower trade tensions while increasing trans-Pacific shipping business. The plan gaining traction since last month in Washington has the U.S. considering removing most, if not all, tariffs levied against Chinese products since last year, the WSJ’s Lingling Wei in Beijing and Bob Davis report. In return, Beijing is offering to lower tariffs and other restrictions on American farm, chemical, auto and other products, while stepping up purchases of U.S. goods. One sweetener would be a Chinese offer to buy $18 billion in liquefied natural gas from Cheniere Energy Inc., with deliveries starting as soon as 2023. Chinese banks could provide financing as part of the deal in the range of $3 billion to build additional facilities to meet the demand. That infrastructure would serve as a kind of promise of more trade in LNG to follow.
Supply Chain Strategies
Amazon.com Inc. is ramping up its role with food suppliers and raising headaches for supermarkets with its new move into the grocery business. The e-commerce giant plans to open dozens of grocery stores in several major U.S. cities, the WSJ’s Esther Fung and Heather Haddon report, as the company broadens its reach in food retailing with a bigger bet on physical stores. Early indications are Amazon will launch the business in Los Angeles as early as the end of the year and then roll out more stores in shopping centers in other big cities. The markets would be distinct from the upscale Whole Foods chain, with a wider selection of consumer goods. That would push Amazon into food supply chains outside the specialized Whole Foods suppliers, and bring new competitive concerns for grocery chains just as they are trying to compete with Amazon’s delivery capabilities.
All this reverse logistics may be getting out of hand. Cities around the world are facing a recycling crisis, the WSJ’s Christopher Mims writes, with garbage collection sites now drowning in more plastics, paper, cardboard and other recyclable materials than processors can handle. From Australia to Japan, New York City to Hong Kong, garbage collectors are burning much of material they collect from curbside recycling bins. One reason for the growing problem is China’s decision to stop accepting the “loathsome foreign garbage” that had long helped feed the country’s insatiable need for raw materials. Some waste managers say they need more products from recycled goods that make economic sense. A St. Louis company found a solution with railroad ties made of glass fibers and plastic that can last six times longer than wooden ties, and they now have customers in four of the largest U.S. rail operators.