UPS United Parcel Service

By Paul Page 

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E-commerce growth is proving more profitable for United Parcel Service Inc. than the rest of the shipping market. UPS reported a $1.27 billion net profit in the second quarter that was 3.2% better than the same quarter a year ago, as revenue expanded 3.8%. The results show the company is getting more efficient at serving the high-cost e-commerce market, the WSJ's Laura Stevens reports. But the strength in online fulfillment and consumer spending was countered by slowing exports due to the dollar's strength and an inventory overhang among industrial customers that is cutting into business-to-business shipments. The Supply Chain and Freight segment reported lower than expected earnings in the quarter. Revenue was up 13% in the business unit that includes freight forwarding and less-than-truckload operations, but the operating profit dropped more than 7% to $192 million.

Economic expansion for the rest of the year will have to go through distribution centers. Inventory retrenchment proved a major drag on the U.S. economy in the second quarter, with the "destocking" by businesses shaving gross domestic product growth nearly in half. The WSJ's Eric Morath and Jeffrey Sparshott report the fifth straight quarterly decline in private inventories subtracted 1.16 percentage points from overall growth, the largest drag from inventories in two years. The question hanging over the business world, and shipping and logistics businesses, is whether the long-running effort to pare back stock levels will leave companies needing to start replenishing their stocks soon. The WSJ's Jon Sindreu writes that would boost to the U.S. economy in the near term, but an inventory rebound will depend on whether consumers keep buying at a strong pace, triggering a push for goods on shelves.

The 2016 presidential campaign still has three months to go, but the vote already seems to have come in against the Trans-Pacific Partnership trade deal. The campaign, with its fervent anti-trade rhetoric cutting across both parties, has dealt a potentially lethal blow to President Barack Obama's signature Pacific trade agreement. The WSJ's Nick Timiraos and William Mauldin write that the chances of congressional passage now look slim after the election, when many supporters had hoped it would be taken up, and even under the next presidential administration. Trade advocates have hoped that Congress will salvage the TPP in a post-election session. But the two parties' political conventions revealed deeper reservations, including digs by Republicans and Democrats at a potential lame-duck vote. The U.S. Chamber of Commerce and several companies have been stepping up their arguments for the trade deal, but even getting a vote would require pro-trade lawmakers to override the incoming president and populist sentiments coursing through the grass roots of both parties.

ECONOMY & TRADE

The European Union battle with China over steel imports is getting bigger -- and more costly. The EU is imposing new anti-dumping tariffs on certain Chinese steel imports, the WSJ's Valentina Pop and Eva Dou report, as the bloc shows growing frustration over overcapacity in China's production that is roiling world steel markets. The U.S. this year has rolled out new tariffs on steel from China and several other countries. The duties, some as high as 266%, have been felt across the market, cutting into U.S. steel imports and triggering higher prices for domestic-produced steel products that helped U.S. Steel Corp. boost its earnings. China, the world's largest steel producer, has doubled its exports to the EU over the past two years, while the bloc's demand languishes below levels seen before the 2008 financial crisis. EU steel prices have fallen roughly 40% over the past two years.

QUOTABLE

IN OTHER NEWS

Libya's state-controlled National Oil Co. plans to restart exports from three oil ports after reaching a deal with local guards that had blocked the facilities. (WSJ)

Ride-hailing giant Uber Technologies Inc. is giving up its costly battle for China's riders, swapping its local operations there for a minority stake in homegrown Didi Chuxing Technology Co. (WSJ)

Eurozone economic growth slowed to 1.2% in the second quarter, down sharply from 2.2% first-quarter growth. (WSJ)

A gauge of U.S. consumer sentiment dropped in July. (WSJ)

An unapproved variety of genetically modified wheat was discovered growing in Washington state, though there are no signs it entered commercial grain shipments. (WSJ)

U.S. employers' personnel costs rose a modest 0.6% in the second quarter, the same as in the first quarter. (WSJ)

Improved commodity prices are expected to boost the first-half profit at mining giant Rio Tinto PLC. (WSJ)

Apparel retailer Columbia Sportswear Co. says a 2.2% sales increase in the second quarter was helped by growing direct-to-consumer sales. (WSJ)

Sportswear retailer Adidas AG raised its guidance for the fourth time this year on strong sales growth around the world. (WSJ)

Brazilian aircraft manufacturer Embraer SA swung to a loss in the second-quarter, as the company set aside money amid a corruption investigation. (WSJ)

The founder of Mideast courier Aramex sold his 10% stake as investor groups led by Dubai businessman Mohamed Alabbar bought a combined 16.5% of the company. (Reuters)

BB&T Securities is dropping its transportation coverage as it exits equity research coverage. (CNBC)

California released a broad environmental plan with goals to bring the state's freight operations to zero emissions. (Riverside Press-Enterprise)

China's Wuhan Guoyu Logistics Industry Co Ltd. may miss a $60.3 million Aug. 6 bond payment because of problems at its shipbuilding subsidiary. (Indian Express)

Vietnam's import of soybean meal for feeding pigs is soaring as pork consumption in the country expands at a rapid pace. (Bloomberg)

Port security grants were spread too thin to help security, the largest U.S. port group says. (American Shipper)

Demand for multitenant warehouse space is growing faster than the rest of the commercial property market, a new report says. (Material Handling and Logistics)

North Carolina-based air cargo startup 21 Air is launching operations with two 767-200 freighters. (The Loadstar)

Qatar Airways Cargo is starting weekly 777-200 freighter service to New York and Halifax, Nova Scotia, from Luxembourg. (Arabian Business)

New Hampshire is seeing its first-ever boom in distribution center construction. (Manchester Union-Leader)

A British legislative report says existing measures are not enough to tackle a shortfall in skilled truck drivers. (Logistics Manager)

Grocery delivery startup Shipt raised $20.1 million in a new round of funding aimed at boosting its competition against Instacart. (Business Journals)

ABOUT US

Paul Page is deputy editor of WSJ Logistics Report. Follow him at @PaulPage, and follow the entire WSJ Logistics Report team: @brianjbaskin, @lorettachao, @RWhelanWSJ and @EEPhillips_WSJ, and follow the WSJ Logistics Report on Twitter at @WSJLogistics.

Subscribe to this email newsletter by clicking here: http://on.wsj.com/Logisticsnewsletter .

Write to Paul Page at paul.page@wsj.com

(END) Dow Jones Newswires

August 01, 2016 06:47 ET (10:47 GMT)

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