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UPS's Shifting Parcel Market; Faltering Jet Fuel Supplies; Java Getting Jolted

By Paul Page

 

UPS shipped few packages than it did a year ago and warned of slower growth ahead as shoppers returned to stores. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS

United Parcel Service is turning lower shipment volume into bigger profits. The package giant’s second-quarter sales rose 14.5% and profit jumped more than 45%, the WSJ’s Paul Ziobro reports, despite a 2.9% drop in shipments in its core U.S. operations. The results show the impact of CEO Carol Tomé’s “better, not bigger” strategy and put UPS among a growing stream of companies that are focused on maintaining strong profit margins rather than pure expansion. UPS is looking to manage its operations tightly as growing e-commerce demand sends a flood of parcels into packed distribution networks. UPS is taking on more small- and medium-size shippers, which tend to be more profitable than larger clients. UPS says its operations also reflect new shifts in the economy. Business-to-business shipments rose 25.7% domestically in the second-quarter, while shipments to homes fell 15.8%, a sign that Americans are heading back into stores.

 
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Transportation

American Airlines is reportedly asking its pilots to conserve fuel. PHOTO: EVA MARIE UZCATEGUI/BLOOMBERG NEWS

The supply chain for jet fuel is looking more fragile, and airlines are hoping it doesn’t crack. Carriers are grappling with shortages of jet fuel at some smaller airports in the western U.S., the WSJ’s Alison Sider reports, adding a new challenge to an aviation sector that has been whipsawed during the pandemic by tumbling demand that has now turned into a travel boom. The rush by passengers back to airports has collided with a shortage of labor and logistical challenges. So far, airports hurt by the fuel shortage are smaller sites in the West. But executives fear the factors limiting distribution, including a lack of truck drivers to haul the fuel and insufficient pipeline capacity, could spread the problems to other sites. The supply is also being affected by the wildfires rolling across western states, with fuel now being diverted to aircraft involved in fighting the blazes.

 
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Quotable

“Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs.”

— The International Monetary Fund, in its updated World Economic Outlook
 

Commodities

Weather challenges and supply-chain disruptions have global coffee markets reeling. Prices for beans out of Brazil are pushing to six-year highs, the WSJ’s Jeffrey T. Lewis and Joe Wallace report, as the worst frost to strike the coffee-growing region in more than 25 years is set to cut a chunk out of next year’s crop. The cold snap is the second weather shock in recent months to strike farmers in the world’s biggest coffee producing country. It’s the latest in a string of weather-related jolts to the commodities sector, with heat waves, fires and floods triggering jitters in broader agricultural markets. The weather in Brazil won’t harm the ongoing 2021 harvest, but farmers will have to pare back their damaged plants, cutting into next year’s crop. There’s not much relief from alternative markets, with a shortage of containers creating difficulties in shipping coffee from Southeast Asia.

 
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Number of the Day

$10.97

Average revenue per U.S. domestic package at UPS in the second quarter, 13.4% more than the same quarter a year ago despite a 2.9% decline in U.S. domestic package volume.

 

In Other News

New orders for durable goods in the U.S. increased 0.8% from May to June. (WSJ)

A measure of consumer confidence in the U.S. rose in July to a 16-month high. (MarketWatch)

Home prices in the U.S. jumped 16.6% to a new record in May. (WSJ)

Apple’s quarterly profit reached a record $21.7 billion as revenue rose 36% to $81.4 billion. (WSJ)

General Electric raised its cash-flow outlook on growing orders for its industrial machinery. (WSJ)

Lysol maker Reckitt Benckiser says sales of cleaning products have fallen faster than it expected. (WSJ)

Commercial real-estate services firm CBRE is buying infrastructure project manager Turner & Townsend for $1.3 billion. (WSJ)

Toyota will suspend production at two Japanese plants as rising coronavirus infections in Southeast Asia disrupt parts supplies. (Nikkei Asia)

Shipping services at China’s coastal ports were sharply cut back under the impact of Typhoon In-Fa. (Lloyd’s List)

India-based ocean rate management platform Freightify raised $2.5 million in a pre-Series A funding round backing its expansion into the U.S. and Europe. (LiveMint)

South African port logistics operator Transnet declared force majeure over a cyberattack that severely disrupted its operations. (The Times)

Union Pacific plans to resume full container service from Southern California on Thursday under a phased-in restoration. (Journal of Commerce)

Navios Maritime Partners is buying four new midsize container ships, with options for two more. (gCaptain)

Pacific International Lines is expanding its fleet as a surging container market washes away the carrier’s longstanding financial woes. (Splash 247)

Bed Bath & Beyond will work with Ryder System to open two U.S. distribution centers as it seeks to slash inventory replenishment times. (Bloomberg)

Hyundai will bring more than 30 hydrogen fuel-cell electric heavy-duty trucks to California under demonstration projects for the technology. (Heavy Duty Trucking)

Lufthansa Cargo is cutting its freighter schedule as an agreement with pilots over extended flying to meet Covid restrictions ends. (Air Cargo News)

Panda Biotech and technology company Oritain will work together to develop traceable, textile-grade hemp fiber. (Sourcing Journal)

Warehouse robotics and artificial intelligence provider Covariant raised $80 million in a Series C funding round. (DC Velocity)

Scotland's Glenfiddich is converting its delivery trucks to run on low-emission biogas made from waste from its own whisky distilling process. (Reuters)

 

About Us

Paul Page is editor of WSJ Logistics Report. Write to him at paul.page@wsj.com.

Follow the WSJ Logistics Report team: @PaulPage, @jensmithWSJ, @pdberger. Follow the WSJ Logistics Report on Twitter at @WSJLogistics.

 
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