Logistics Report: Trade’s Collateral Damage; Eyeing Acquisitions; Investing in Parts

Date: Monday, May 13, 2019
Source: The Wall Street Journal

Manufacturers and raw materials suppliers around the world are bracing for the collateral damage from the escalating U.S. tariff fight with China. From the world’s biggest miners to German car makers and Japanese cosmetics manufacturers, companies tied to global supply chains will see business jarred by shifting trade flows because of the trade conflict. The WSJ’s Chuin-Wei Yap and Takashi Mochizuki write that Beijing is weighing retaliation but so far has held fire. The impact will likely be felt in South Korea, where companies send goods such as semiconductors and petrochemicals to China, that are incorporated into products shipped to the U.S. South Korean exports, a quarter of which go to China, fell for the fifth straight month in April. After a round of U.S.-China talks ended Friday with no agreement, the WSJ’s Julie Bykowicz and Chao Deng report China invited top U.S. officials to Beijing to continue negotiations.

Apple Inc. and its extensive Asia-focused electronics supply chain could be in the crosshairs in the renewed trade battle between the U.S. and China. The escalating tensions put the company’s iPhone business at risk just as the tech giant appears to be shoring up declining sales of its foundation product. The WSJ’s Tripp Mickle reports the latest round of tariff increases don’t directly affect Apple’s signature products, but a threatened new tariff of 25% on $325 billion in Chinese imports would cover virtually all Chinese exports to the U.S., including Apple devices. The company is exposed to future tariffs because it assembles almost all of its products in China. Apple also counts on Greater China for about a fifth of its sales, making the company and its extensive supplier network vulnerable if China retaliates. Market research firm Canalys says iPhone shipments to North America fell 19% last quarter.

 

Transportation

A new round of shipping industry consolidation could be forming in Asia. Cosco Shipping Holdings Co. is circling Singapore’s Pacific International Lines as a potential takeover target, as ongoing financial stress on the water creates a possible opening for the Chinese carrier to extend its expansion strategy. The WSJ’s Costas Paris and Joanne Chiu report Cosco and PIL aren’t in formal acquisition talks but that PIL’s sale of part of its container manufacturing business to Cosco highlights the carriers’ close ties. An acquisition would stretch a Cosco network that forms a maritime backbone for China’s Belt and Road Initiative. PIL has significant Africa and emerging-market business where China has targeted its investments. But PIL has been increasingly pushed to the margins by consolidation among big container lines that has left the world’s top five carriers controlling some 64% of global shipping capacity, according to Alphaliner.

Logistics Technology

Business-to-business e-commerce is drawing more investors. On-demand parts marketplace Xometry Inc. is adding $50 million in a new funding round, the WSJ Logistics Report’s Jennifer Smith writes, as it looks to build out a business that connects companies that need smaller runs of parts with more U.S. manufacturers and machine shops. The Maryland-based company is at the center of efforts to use new technology to bring together industrial suppliers and producers while offering small operators the benefits of scale. Online marketplaces are taking a bigger role in industrial networks, and that’s adding scale to Xometry’s own business. The company expects to do $100 million in business this year, with most coming from its marketplace. The Series D round could help expand the range of parts made through the marketplace, potentially including electronic products such as printed circuit boards.

 

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