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LogisticsLogistics

Tighter Railroad Reins; China’s Longer Lockdowns; Navigating Sanctions

By Paul Page

 

A Union Pacific train in St. Louis last July. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS

Freight rail service problems are drawing greater attention from federal regulators. The sector’s main regulator is moving to make it easier for shippers to get government intervention over service complaints, the WSJ’s Ted Mann reports. The Surface Transportation Board's vote to update emergency service rules ratchets up pressure on the railroads to resolve delays that shippers say are contributing to their supply-chain woes. The plan would speed up the process for the board to consider and act on shipper complaints. More broadly, it signals a shifting balance at the regulatory body over questions regarding service for the sector’s commodity customers. The board vote comes as Class 1 railroads are reporting improved quarterly earnings despite declining shipping volumes. Union Pacific Chairman Lance Fritz said after the railroad reported a 22% profit gain that service problems are “having a real impact on our customers and their ability to serve their markets.

 
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Government & Regulation

Trucks wait to pass through a checkpoint outside Shanghai. PHOTO: QIAI SHEN/BLOOMBERG NEWS

Manufacturers in China are discovering that reopening their factories isn’t as simple as going along with a government edict. Production is resuming only gradually at Tesla’s factory, the WSJ’s Yang Jie reports, because parts suppliers remain idle and trucking disruptions are preventing essential components from getting through. The problem is the result of the nature of interwoven supply chains and suggests that recovering from the impact of China’s Covid lockdowns will likely be complicated. German manufacturers such as auto-parts supplier Robert Bosch and chemicals producer BASF say they are facing potential disruptions as logistics snags in the Yangtze River Delta region have dried up the flow of components. China is ramping up efforts to get businesses back on track, and cities are trying to ease logistics disruptions. Still, Tesla display supplier AU Optronics forecasts the supply-chain impact to last for another three months even if lockdowns end soon.
 

 
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Quotable

“If you take the risk, your ship will earn more than $200,000 a day for going into the Black Sea compared with $30,000 elsewhere.”

— A Singapore oil trader
 

Economy & Trade

A car carrier at the Port of Zeebrugge in 2018. PHOTO: JASPER JUINEN/BLOOMBERG NEWS

A vast lot of some 8,000 luxury cars sitting at Belgium’s Port of Zeebrugge provides a vivid illustration of the difficulties shipping authorities face in navigating sanctions on Russia. The cars that include the latest Lexus, Cadillac and Mercedes models arrived from Asia in early April, the WSJ’s Costas Paris writes, and were supposed to be transshipped to Russia. But authorities said the vehicles came under a bar against luxury goods. Marc Adriansens, director of the port’s car terminal, says the cars are part of a range of products stuck at Zeebrugge because of sanctions. The European Union has issued guidelines on the bans but port operators say the rules are often confusing and involve a lot of exemptions. European customs officers are struggling to keep up, and port officials say delays at gateways to check ships and their products is adding to strains in supply chains.

 

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

The World Bank estimates the cost of physical damage to Ukraine’s infrastructure and buildings from Russia’s attacks at $60 billion. (WSJ)

Lloyd’s List Intelligence data show Greek-owned tankers comprise 50 of the 140 port calls to load Russian oil during April at key Baltic and Black Sea ports. (Lloyd’s List)

The head of ship manager V. Group wants NATO to escort commercial vessels passing through the Black Sea. (Financial Times)

Anheuser-Busch is in talks to sell its Russian joint venture interest to Turkey's Anadolu Efes, and will take a $1.1 billion impairment on the transaction. (WSJ)

Swedish bearings manufacturer SKF will cease all business and operations in Russia, and take a $500 million writedown. (WSJ)

For the latest updates from Russia and Ukraine, click here

 
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Number of the Day

$1,300

Average long-term contract rate per 40-foot container for ocean exports from the U.S. East Coast to Asia in mid-April, down from $1,550 in mid-March, according to Xeneta.

 

In Other News

Surveys of purchasing managers show economic growth is slowing this month across large parts of the globe. (WSJ)

Steelmakers say demand is rebounding, driven by booming construction and heavy equipment industries, and slowly expanding automotive production. (WSJ) 

Conagra’s finance chief is ramping up analysis of truck-availability and commodities data in trying to fight inflation. (WSJ)

Gap expects first-quarter sales to drop by at least 10% on problems at its Old Navy business. (WSJ)

Bed Bath & Beyond is fielding interest from potential acquirers of its Buybuy Baby unit. (WSJ)

American Eagle Outfitters Chief Supply Chain Officer Shekar Natarajan says retailers should cooperate more in their supply chains while competing in other areas for customers. (CNBC)

Grocery chain Lidl named 40-year shipping industry veteran Peter Grönwoldt to run its new Tailwind Shipping Lines. (Splash 247)
.
A U.S. judge ruled Hapag-Lloyd must pay a California drayage operator $822,220 over improperly assessed detention charges for imported containers. (Journal of Commerce)

Pacific International Lines is planning more new ship purchases now that the regional container line has repaired its finances. (ShippingWatch)

Walmart saw a dramatic increase in truck driver applications after announcing a pay increase. (Yahoo Finance)

First-quarter operating earnings at Sweden’s AB Volvo rose 7.3% to $1.3 billion despite supply-chain disruptions in heavy-duty truck production. (Reuters)

Logistics technology supplier Descartes Systems acquired machine-learning route planner Foxtrot for $4 million. (Modern Distribution Management)

Amazon-based warehouse automation startup Agility Robotics raised $150 million in a Series B funding round. (TechCrunch)

 

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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