Logistics Report: The Top Logistics and Supply Chain Stories of 2019

Date: Tuesday, December 31, 2019
Source: The Wall Street Journal

A tumultuous year in shipping, logistics and transportation was dominated by trade, as the U.S.-China trade war, Brexit and a series of geopolitical showdowns upended global supply chains. New tariffs both threatened and enforced had shippers and suppliers scrambling to manage new costs and trade barriers while also considering bigger changes to sourcing and manufacturing. That has had international maritime operators resetting routes and capacity in what executives say has been a period of unprecedented uncertainty.

In May, the WSJ Logistics Report’s Costas Paris wrote that shipping experts were warning that escalating tensions between the U.S. and China could curtail growth in trans-Pacific seaborne trade over 2019. A.P. Moller-Maersk A/S Chief Executive Soren Skou warned new could cut growth in global container volumes by up to a third. The roller-coaster ride for shipping volumes that began in 2018 grew even more pronounced in 2019 as new levies were announced, sometimes delayed and then finally implemented, with the impact roiling trade flows around the world so much that it raised concerns about a global economic slowdown.
 
The tariff waves landed hard at many U.S. ports.

Through the first 10 months of 2019, imports into U.S. West Coast ports overall had fallen 3% from the year before while East Coast ports saw a 5.2% boost in inbound container volumes. By October, imports into the ports of Los Angeles and Long Beach were down by double digits. That was partly because of a tough comparison to late 2018, when importers rushed to bring in goods ahead of levies due to start with the New Year. But the decline has been steep enough to raise questions over more fundamental shifts in U.S. supply chains away from the enormous focus on China.

Environmental Advances

Ship operators should have a clearer view of their business in the coming year as landmark environmental rules take effect. Slow preparations for a mandate to reduce sulfur emissions starting Jan. 1, 2020 picked up speed in 2019. The WSJ Logistics Report’s Costas Paris writes that many carriers moved to add “scrubber” exhaust systems to thousands of ships while other operators and oil companies began setting up systems for newly formulated low-sulfur fuel to replace the heavy-polluting bunker that has long powered commercial ships.

Some operators and countries have argued even recently that the rules should be pushed back. But a global maritime industry that contributes 3% of the world’s airborne pollution faces potentially stricter environmental rules if it can’t meet the new standard, and the regulating International Maritime Organization is vowing to stick to the schedule.

The biggest immediate concern for many carriers will be the financial impact of the new mandate. With some operators opting for scrubbers as a lower-cost alternative to cut emissions, competition over costs could change drastically on some trade lanes.

In other major shipping news in 2019 ...

Tanker markets were buffeted by geopolitical events, including unrest in the Persian Gulf and new sanctions by the U.S. against China-owned crude carriers.

A record seizure of a cocaine shipment on a container ship at the Port of Philadelphia shed new light on the growing use of commercial shipping for large-scale illicit drug shipments.

Amazon's Logistics Growth

In the U.S., domestic logistics operations were jolted in 2019 by commercial and market forces. While the trucking and rail sectors were coping with a retreat from the heady growth days of 2018, Amazon.com Inc. picked up the pace in a dramatic expansion of its own logistics network. The expanded use of its own fulfillment centers, truck trailers and delivery vans is already providing growing competition to traditional shipping companies, the WSJ Logistics Report’s Jennifer Smith writes. Amazon is the biggest mover in an array of technology-focused companies like load matching specialist Convoy that are drawing big investment backing and forcing major changes across the shipping world.

Amazon’s effort may trigger still deeper changes in the American business landscape as it brings logistics to the forefront of an e-commerce juggernaut that is transforming the retail sector. The impact is rattling a FedEx Corp. business that virtually invented the air express industry, the WSJ's Paul Ziobro writes. But it’s also reaching other operators, and inspiring a growing array of startups and traditional companies that are using their own tools to get closer to consumers with seamless sales and shipping strategies.

Trucking is Braking

While e-commerce was growing, transportation operations were retreating amid a slowdown in the industrial economy.

Declining demand across much of the trucking industry after historic growth the year before left many truckers facing sliding freight rates and capacity out of line with the diminished business from manufacturing and retail customers. Trucking bankruptcies accelerated rapidly in 2019, the WSJ Logistics Report’s Jennifer Smith writes, with many of the hundreds of small companies falling aside as a weaker market exposed faulty financial fundamentals.

The year was bookended by two significant failures that reverberated across the sector, and put millions of dollars in freight business up for grabs. Less-than-truckload carrier New England Motor Freight’s abrupt tumble into bankruptcy in February was the biggest collapse in trucking in 17 years. Celadon Group Inc. was an even bigger operator, and its problems were years in the making when the truckload carrier gave up its turnaround efforts in early December. NEMF and Celadon both had substantial networks, but they counted small shares of the $700 billion U.S. trucking market that will enter 2020 with fewer carriers as operators hope for an industrial turnaround.

In other domestic logistics news …

Warehouse operators brought in robotics and artificial intelligence at a faster pace as they moved to automate a labor-intensive business.

Red-hot demand for warehouse space cooled down as new construction reached equilibrium with growth.

Investment in self-driving trucks picked up speed.

 

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