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LogisticsLogistics

Fuel Costs are Soaring; China’s Hobbled Factories; Selling Russia’s Tankers

By Paul Page

 

Love's Truck Stop in Springville, Utah. PHOTO: GEORGE FREY/AGENCE FRANCE-PRESSE

Soaring diesel prices are triggering concerns about the impact that higher fuel costs will have on trucking operations and on the broader economy. The average price of diesel has surged beyond $5.62 a gallon across the U.S., up by more than $1.50 a gallon in barely over two months and reaching record levels in each of the past two weeks. Trucking officials tell the WSJ Logistics Report that smaller fleets face the greatest exposure to the rapid increases because of their thin financial cushion and challenges in passing along fuel surcharges. Trucking executives say their bigger concern is that higher transportation costs are rippling through supply chains, adding to inflationary pressures across the economy. Some shippers are trying to move some goods to rail. But Doug Smith of Utah trucker Ralph Smith says some companies are starting to rethink projects as rising transportation costs threaten to upend construction budgets.

  • Truck stop operator Love’s says it is closely watching its diesel fuel supplies in the Northeast amid concerns over potential shortages. (Dow Jones Newswires)
 

Quotable

“It’s coming directly out of my profit.”

— Rodney Morine, an independent trucker based in Opelousas, La., on rising diesel prices.
 
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Supply Chain Strategies

Workers lined up for Covid testing at a Foxconn factory in Wuhan, China, last year. PHOTO: ASSOCIATED PRESS

China’s Covid-19 lockdowns are short-circuiting the consumer electronics industry. Apple, Sony and Panasonic are projecting significant losses this quarter because of parts shortages, production shutdowns and lost sales caused by Beijing’s zero-tolerance policy. The WSJ’s Yang Jie writes that contract manufacturing heavyweights Foxconn and Pegatron are slowing and suspending production because of Covid outbreaks, undercutting global supply chains. The stoppages are hitting even though companies like Foxconn, the world’s largest assembler of iPhones, are implementing closed-loop bubbles in which workers are housed close to factories. Apple projects $8 billion of lost revenue this quarter because of the shutdowns. Sony is facing delays procuring parts and is warning of a shortage of games consoles. The China shutdowns, now approaching their third month, are also threatening the contract manufacturers. Pegatron’s sales in April fell 19% year-over-year. Sony’s finance chief projects a return to normal in three months.

  • Many of the companies Beijing has permitted to resume operations during Shanghai’s lockdown are working at a fraction of their full capacity. (South China Morning Post)
 
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Transportation

A Sovcomflot tanker at the Primorsk Commercial Seaport, the end point of the Baltic Pipeline System. PHOTO: ALEXANDER RYUMIN/ZUMA PRESS

The speedy sale of a big part of Sovcomflot’s tanker fleet is underway. The Russian state-controlled tanker operator has sold about a dozen ships to buyers in Asia and the Middle East, the WSJ’s Costas Paris and Benoit Faucon report, in actions triggered by Western sanctions that are buffeting global energy markets. Sovcomflot is selling up to one-third of its 122-ship fleet ahead of an EU deadline Sunday that stops companies from dealing with Russia following its invasion of Ukraine. The new crude-oil tankers and natural-gas carriers could help European countries looking to wean themselves from Russian oil and gas that is piped across the continent. The sale also provides a shortcut for carriers that can’t wait several years for a new vessel. So far, about a dozen ships have been scooped up while negotiations continue with other prospective buyers including China Merchants.

 

Here are recent developments following Russia’s invasion of Ukraine:

Russia's limited gains in Donbas and the Ukrainian goal of reclaiming the entire territory portend a long battle in eastern Ukraine. (WSJ)

Natural-gas prices in Europe are shooting higher after Russia unveiled sanctions on energy companies operating on the Continent. (WSJ)

Shell is selling its Russian retail-station and lubricants business to Russia’s Lukoil. (WSJ)

German engineering giant Siemens is ending its 170-year-old business in Russia. (WSJ)

The head of the UN World Food Program says the world faces possible food shortages next year if Ukraine's seaports remain blocked. (WSJ)

Western pressure on Russia over the invasion of Ukraine lowered the country’s crude-oil output by 9% in April. (WSJ)

For the latest updates from Russia and Ukraine, click here

 
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Number of the Day

$7,657

Drewry Shipping Consultants’ World Container Index for average world-wide rates per 40-foot container for the week ending May 12, down 17.5% since the first week of March to the lowest level since the week of June 17, 2021.

 

In Other News

Increases in U.S. suppliers’ price eased in April. (WSJ)

New applications for unemployment benefits in the U.S. rose slightly but remained near historic lows. (WSJ)

Baby-formula manufacturers and retailers say they are working to fix long-running shortages, but the hardships facing U.S. families may take months to abate. (WSJ)

Electric-vehicle startup Rivian is recalling 502 battery-powered pickup trucks over potentially faulty air bags. (WSJ) 

Grocery-delivery company Instacart filed confidentially for an initial public stock offering. (WSJ)

Saudi Aramco surpassed Apple as the world’s most valuable company. (WSJ)

Car maker Subaru will spend $1.9 billion to build Japan’s first domestic electric-vehicle plant. (Nikkei Asia)

Daimler Trucks North America and engine maker Cummins are working together on a Freightliner Cascadia truck that runs on hydrogen fuel cells. (Inside Indiana Business)

DHL ordered 44 Volvo Trucks electric vehicles for European operations as part of a plan to scale up use of electric power. (AJOT)

Truckload carrier Werner Enterprises is paring back its sales of used trucks and trailers because of backlogs at manufacturers. (Transport Dive)

Container line Hapag-Lloyd more than tripled its first-quarter net profit to $4.7 billion. (gCaptain)

Prices for dry bulk’s largest capesize vessels have surged to a five-month high. (Lloyd’s List)

An appeals court in New York dismissed a state suit against Amazon over the company’s Covid safety protocols in warehouses. (Industrial Distribution)

E-commerce startup Boxed will have FedEx deliver most of its packages. (Dow Jones Newswires)

SAP will start making its warehouse management and distribution apps available on Apple devices, (Supply Chain Digital)

 

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, @pdberger. and @LydsOneal. Follow the WSJ Logistics Report on Twitter at @WSJLogistics.

 
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