UPS United Parcel Service

By Paul Page 

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Amazon.com Inc.'s designs on the logistics world may not be as grand as some delivery companies believe. Speaking at a conference hosted by the technology website Recode, Amazon chief Jeff Bezos played down the e-commerce giant's expansive moves to handle its own distribution , the WSJ Heard on the Street's Miriam Gottfried reports. Mr. Bezos says the goal is not to entirely replace delivery from FedEx Corp., the U.S. Postal Service and, most significantly, United Parcel Service Inc. but to "supplement it heavily." Amazon's rapid expansion in distribution, including a burgeoning network of distribution centers and new contracts for aircraft capacity, is prompting big speculation in the market -- and fears that the company will siphon shipments away from freight carriers. For now, Mr. Bezos says Amazon is building its business with UPS and the Postal Service. What could keep that up? "Better prices," he says.

Help for American steel makers is proving costly for other parts of the economy. New tariffs helped push steel imports into the U.S. down 29% in the first quarter, pushing a surge in surge in prices charged by U.S. companies, the WSJ's John W. Miller reports. U.S. Steel Corp., for instance, flexed its pricing power, raising its base pricing for spot orders of some products by $60 per ton in April. Now, the higher prices are rolling across the supply chain, raising costs for manufacturers of goods ranging from oil pipes to factory equipment to cars. U.S. steel makers are responding by scaling up production, but global steel output is down and the impact of lower inventories is being felt through the supply chain. Average delivery times in the U.S. have increased to 6.2 weeks, from 3.6 weeks when the year started, leaving factories to adjust their schedules even as they handle the higher costs.

Germany may not be ready to turn part of its automotive supply chain over to China. The country's economic ministry is putting together a European offer for Kuka AG, which makes industrial robots and automation technology, the Ruth Render and Christian Grimm report. Kuka figures heavily in Germany's industrial economy, counting 50% of its revenue from auto manufacturers and parts suppliers. That's why China's Midea Group is bidding $5 billion for the business, the latest move by Chinese buyers looking to acquire engineering and technological know-how as they increase auto production within China. It would be the biggest acquisition yet by a Chinese company in Germany, and what critics believe is a step too far. Still, some auto industry figures scoff at the concerns, and it's uncertain whether German authorities can line up a European counter-offer.

ECONOMY & TRADE

United Continental Holdings Inc. points to passenger demand behind its new nonstop flights to second-tier cities in China, but the real gain may be in the bellies of the planes. The airline will start flying between San Francisco and Hangzhou and Xi'an, the WSJ's Susan Carey reports, adding to United's operations to Shanghai, Beijing and Chengdu. The Hangzhou flight will plug United into an industrial city in the center of an expanding regional manufacturing and logistics business built around technology development, as well as the headquarters of e-commerce giant Alibaba Group Holding Ltd. Cargo experts say United's 787 aircraft will have room for cargo demand, and United can use the freight boost. Its cargo revenue fell nearly 20% year-over-year in the first quarter, and pricing has been falling in an airfreight market that's been relatively stagnant in recent years.

The manufacturing sector is providing signs of progress even if the signals of future growth remain faint. The Institute for Supply Management's measure of factory activity in May ticked up from April, the WSJ's Anna Louie Sussman reports, the third straight month of expansion. The advance from March was slim, however, and slipping indices for new orders, production and inventories all suggest manufacturers still are advancing only fitfully amid tepid global economic growth. Markit says a gauge of eurozone manufacturing activity fell to a three-month low in May, although that measure remained in expansionary territory. Factory conditions in Japan hitting a three-year low in May, meantime, and China's factory sector appears to be treading water. The best sign for U.S. manufacturing may have been that the ISM's new orders index was in expansion for the fifth straight month, suggesting some businesses still believe demand will grow.

QUOTABLE

IN OTHER NEWS

Major auto makers reported declining sales in the U.S. in May. (WSJ)

The Federal Reserve says in its "beige book" economic report that labor markets are tightening across most of the U.S., pushing up wages. (WSJ)

Reluctance among banks to finance deals in Iran is undercutting attempts by Airbus Group SE to sell planes to Iran Air. (WSJ)

Uber Technologies Inc. has raised $3.5 billion from the investment arm of Saudi Arabia. (WSJ)

Lands' End Inc. swung to a loss last quarter, dragged down by a 7.1% decline in same-store sales and aggressive discounting. (WSJ)

Under Armour Inc. says liquidation sales at Sports Authority Inc. will cut into its own sales this year. (WSJ)

Tesla Motors Inc. co-founder Elon Musk, facing delayed delivery of the new Model X SUV, plans to revolutionize efficiency at factories. (Los Angeles Times)

California lawmakers want to slow efforts to allow easier export of coal through the Port of Oakland. (San Francisco Chronicle)

Alibaba told vendors on its TMall site to stop selling medicine because of an "urgent" regulatory directive. (Reuters)

A coalition of U.S. Great Lakes ports, ship operators and maritime groups filed a lawsuit challenging the Coast Guard's 2016 increase in pilotage rates. (Crain's)

Shipbuilder Hyundai Heavy Industries laid out a $2.94 billion restructuring plan that would include asset sales and workforce reductions. (Korea Times)

Amazon expects to hire 1,000 workers at its new distribution center in San Marcos, Texas, between Austin and San Antonio. (Austin American-Statesman)

BNSF Railway Co. is eliminating 62 management jobs as it restructures operations amid the downturn in coal shipping. (American Shipper)

Volvo Trucks expects to lay off more workers at its Dublin, Va., plant because of diminishing truck orders. (Commercial Carrier Journal)

German ship operator Rickmers Linie took over the project cargo business of Nordana Project & Chartering. (Marine Link)

Hong Kong-based Kerry Logistics completed its acquisition of U.S. provider Apex Maritime. (LBR)

Warehouse equipment maker Bluff Manufacturing was acquired by Wincove Private Holdings LP. (Modern Materials Handling)

The world's longest and deepest rail tunnel opened in Switzerland. (BBC)

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.

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(END) Dow Jones Newswires

June 02, 2016 06:34 ET (10:34 GMT)

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