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Amazon’s Pause in Profits; Redirecting Gas; Drilling Supply Chain Woes

By Paul Page

 

Outside Amazon's Staten Island, N.Y., this month. PHOTO: PETER FOLEY/SHUTTERSTOCK

Amazon is setting its focus on profitability and efficiency after a period of unrelenting expansion of its logistics footprint. The e-commerce giant’s CEO, Andy Jassy, says the company isn’t “chasing physical or staffing capacity” any longer, but will focus on improving productivity in its fulfillment network. The strategy comes after Amazon posted its first quarterly loss since 2015, the WSJ’s Sebastian Herrera reports, as growth slowed significantly to 7% over the year-ago quarter and the company coped with higher costs and stalled online shopping. Amazon’s world-wide shipping costs reached $19.6 billion in the quarter, up 14% from last year even as sales at its online stores fell 5%. The trend isn’t unique to Amazon. The share of U.S. retail sales that happen online has slipped after rising markedly during the pandemic, and e-commerce sales declined on an annual basis in March while in-store sales increased.

 

Quotable

“Today, as we’re no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network.”

— Amazon CEO Andy Jassy
 
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Commodities

An LNG tanker waiting to be loaded earlier this month in Louisiana. PHOTO: MARK FELIX/BLOOMBERG NEWS

Global energy supply chains are in growing upheaval as European countries accelerate their efforts to replace Russian oil and gas. New steps by Germany and other countries follow Moscow’s halt of gas exports to Poland and Bulgaria. The WSJ’s Georgi Kantchev, Joe Wallace and Matthew Dalton report that is raising fears in European capitals that their supplies could be cut off as Russia seeks to wield energy as a weapon while it attacks Ukraine. But moving energy from more far-flung regions to Europe will require longer and more complicated transport delivery networks. Energy markets are feeling the impact, with natural-gas prices rising this week on the prospect of tighter supplies. The U.S. is jumping in with plans for more gas exports, and European and American officials are signaling they are more open to long-term deals to ship American fuel across the Atlantic that would provide backing for more investment in export infrastructure.

 

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

Russian forces have riddled Ukrainian fields with mines and destroyed equipment in what Ukrainians say is a campaign to hobble the country’s agricultural industry. (WSJ)

European gas importers are considering ways to keep importing Russian gas using Moscow’s new mandated payment mechanism without violating sanctions. (WSJ)

Danish brewer Carlsberg plans to restart production in Ukraine. (WSJ)

Several marine insurance firms are dropping coverage for Russian state-owned tanker operator Sovcomflot. (ShippingWatch)

For the latest updates from Russia and Ukraine, click here

 
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Commodities

Unused drilling rigs in Odessa, Texas, in March. PHOTO: JOE RAEDLE/GETTY IMAGES

Those $100-a-barrel prices aren’t doing much to solve supply-chain challenges at America’s oil fields. Drillers in the prolific Permian Basin are facing steel and equipment shortages and difficulty finding and keeping workers, the WSJ’s Collin Eaton reports, crimping the ability of companies in the oil-rich region to produce more crude. The last time prices were this high, U.S. production jumped nearly 20% annually, but this year drillers are on track to only raise output by 8%. Some shale producers are even pausing operations as they await steel casing, and Burleson Petroleum may have to wait nine months for an electric cable while supply-chain problems are threatening to blow up the company’s budget. The strains appear to be showing up in oil transport networks, with the Association of American Railroads reporting that U.S. rail carloads of petroleum and petroleum products are off 15.5% so far this year.

 
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Number of the Day

3.07%

National vacancy rate for U.S. industrial real estate in the first quarter, up from 3.04% in the fourth quarter of 2021 and down from 3.92% in the first quarter of 2021, according to CBRE.

 

In Other News

The U.S. economy contracted 1.4% in the first quarter as supply disruptions weighed on output and masked strength in consumer and business spending. (WSJ)

A measure of the strength of the U.S. dollar is close to its highest level in 20 years against a basket of currencies. (WSJ)

Soybean prices are up 27% so far this year and corn futures have risen 37%, signaling higher food inflation is coming. (WSJ)

Apple’s revenue rose 9% to $97.3 billion in one of the best quarters in the company’s history. (WSJ)

Consumer-goods supplier Unilever is planning further price increases after raising prices by an average of 8.3% in the first quarter. (WSJ)

First quarter sales at Mattel jumped 19% as the toy maker said it had improved its supply chain operations. (WSJ)

Heavy-equipment manufacturer Caterpillar says its struggles to get parts aren’t improving. (WSJ)

Tool maker Stanley Black & Decker cut its profit outlook for the year, primarily due to higher commodity and shipping costs. (WSJ)

Hershey raised its outlook for the year after posting double-digit growth in first-quarter sales and profit. (WSJ)

Yazaki and other Japanese auto suppliers are setting up production bases in North Africa to diversify their supply chains. (Nikkei Asia)

Amazon is permanently ending its bar against warehouse workers having cell phones. (Vice)

Container line Ocean Network Express more than quadrupled its fiscal year net profit to $16.8 billion as revenue more than doubled to $30.1 billion. (Lloyd’s List)

Hapag-Lloyd raised its outlook for full-year operating profit to between $12.5 billion and $14.5 billion. (MarketWatch)

The chairman of container line Yang Ming says port bottlenecks world-wide are easing. (Bloomberg)

Trucker Schneider National raised its full-year outlook as first-quarter profit jumped 68% to $92.1 million. (Dow Jones Newswires)

Major U.S. railroads told regulators it may take months to clear congestion in their networks. (WSJ) 

Canadian Pacific’s operating ratio deteriorated by more than 10 percentage points in the first quarter. (MarketWatch)

The Airforwarders Association is leading a coalition looking for ways to clear cargo congestion at U.S. airports. (Air Cargo News)

 

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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