Logistics Report: Stacking Up Imports; Uneasy Logistics Merge; Blaming Supply Chains

Date: Wednesday, February 20, 2019
Source: The Wall Street Journal

The stream of imports that’s been hitting U.S. seaports in recent months is starting to strain some warehouses and shipper bank accounts. Warehousing operators near Southern California say goods are stacking up at unprecedented levels, the WSJ Logistics Report’s Erica E. Phillips writes, as the push by companies to move goods ahead of potential tariffs jams up distribution networks. U.S. businesses have been pulling shipments forward ahead of expected tariff increases and China’s Lunar New Year holiday, boosting container imports into the ports of Los Angeles and Long Beach by 9% in the last three months of 2018. That’s added stresses in congested supply chains as cargo delays have triggered special storage fees. The speeded-up imports also add risks for shippers: December’s 1.2% decline in U.S. retail sales was the biggest drop since 2009, and a reminder that all that inventory comes without a guarantee of downstream demand.

Consolidating the global logistics sector isn’t proving to be easy.Kuwait’s Agility Group is jumping into a tug-of-war over Swiss freight major Panalpina Welttransport Holding AG, the WSJ Logistics Report’s Costas Paris writes, raising the stakes in Danish group DSV A/S’s effort to bring Panalpina under its own spreading logistics umbrella. DSV has raised its offer for Panalpina and says it will put up cash for the shares. Still, the three-way tussle looks less like a bidding war for now than an effort by Panalpina to fend off a takeover and remain independent. The tie-up with Agility would mark more of a working agreement for their warehousing, transportation and management and other operations tied to freight forwarding. Rival Ceva Logistics has also tried to stave off buyouts, including an earlier bid by DSV, suggesting that targets of acquisition aren’t terribly interested in consolidating.

Commodities

Electric vehicles aren’t providing the power for commodities that some had been seeking. Prices for the cobalt and lithium metals crucial to making rechargeable batteries for electric cars and smartphone have been tumbling this year, accelerating a decline that began in 2018 while markets in other risky assets have staged a comeback. The WSJ’s Amrith Ramkumar reports cobalt prices have fallen more than 30% so far this year to their lowest level in two years while lithium prices have slumped for 10 straight months to a multiyear low. The drop in battery-metals prices carries a harsh lesson in the basics of supply and demand in commodities. Global electric car sales jumped 64% in 2018. But miners who rushed to take advantage of the excitement in battery metals boosted production, while uncertainty about China’s continued subsidies for electric vehicles raised new doubts about the metals.

Supply Chain Strategies

A struggling retailer is pointing to its supply chain as a major factor in the company’s collapse into bankruptcy protection. U.S. retail chain ShopKo says drug distributor McKesson Corp. may have overcharged its stores for years and could be the main reason the retailer’s pharmacy operations failed. The WSJ’s Becky Yerak reports the company is asking a bankruptcy judge for help investigating the sales and wants information that includes the cost of its supplies and records of McKesson’s profitability from the relationship. The request in bankruptcy court highlights the growing stresses between store owners and suppliers as retailers like ShopKo struggle with changing shopping patterns. McKesson says it has supported its customers during challenging times, and it said before ShopKo’s bankruptcy that the retailer had been stiffing its suppliers. The company now claims to be on the hook for more than $60 million in unpaid bills.

 

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