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Today's Logistics Report: Tangled Supply Chains; Walmart Stocking Up; Targeting Soybeans

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05/17/2019 | 10:50am EDT

By Jennifer Smith

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Questions over Chinese labor practices are weaving their way into major Western supply chains. Factories that produce goods found in Gap Inc., Adidas AG and Kraft Heinz Co. products are filling up with workers from training programs tied to China's campaign to forcibly assimilate its Muslim population, WSJ's Eva Dou and Chao Deng report. The compulsory programs sending workers to textile and food plants in the northwest region of Xinjiang include political indoctrination and could violate corporate policies requiring suppliers to maintain responsible workplace conditions. The labor issues highlight the opacity of complex apparel and food supply chains. Some companies apparently weren't aware of links to subcontractors in Xinjiang, where boosting manufacturing jobs is a key element of China's crackdown. Campbell Soup Co. and Kraft say tomato paste from Xinjiang accounts for a fraction of their worldwide supply, while apparel makers are looking more closely at suppliers there.

Inventory is piling up at Walmart Inc. The retail behemoth's lean supply chain is being tested as it amasses more goods to win market amid the collapse of some store operators and to speed up online delivery, the WSJ's Sarah Nassauer reports. Inventory jumped 5.9% in the first quarter as Walmart loaded up on patio furniture and bought more toys and shoes to fill gaps left by as Toys "R" Us and Payless ShoeSource Inc. The retailer is also putting more inventory at e-commerce fulfillment centers that are the linchpin of its plan to expand free next-day shipping. U.S.-China trade tensions also played a role, as Walmart pulled some imports forward ahead of rising tariffs. Carrying more inventory can add costs, but Walmart's U.S. operating income grew 5.5% in the first quarter as transport costs moderated and online sales margins improved.

ECONOMY & TRADE

U.S. export restrictions against China's Huawei Technologies Co. could send shockwaves through Silicon Valley supply chains. The Commerce Department's decision to impose licensing requirements on firms that supply U.S. technology to the Chinese telecom giant threatens Huawei's access to advanced components and could hurt foreign suppliers who deal in U.S. parts, the WSJ's Dan Strumpf, Yoko Kubota and Wenxin Fan report. Huawei is the world's leading telecom-gear supplier and has been stockpiling inventories to guard against such disruptions. Last year it bought some $11 billion in U.S. components from suppliers including Qualcomm Inc., Intel Corp. and Oracle Corp. But the Shenzhen-based company is also working to reduce its reliance on U.S. suppliers, making more of its own advanced chips and other technology. Huawei suppliers may have to wait weeks or months for approvals--assuming U.S. regulators grant any licenses at all.

Soybeans may be the next casualty in Canada's geopolitical dispute with China. Chinese customs authorities are delaying inspections of Canadian soybean imports and casting a wider net that could undercut the country's agriculture sector, the WSJ's Paul Vieira writes, as relations between the two countries fray in the wake of Canada's decision to arrest a senior Huawei executive. China revoked import licenses for Canadian canola seeds in March, and on Thursday formally arrested two Canadian citizens on espionage charges. Moves to limit soybean imports could jeopardize some $743 million in annual sales to China, the top export market for Canada's soybean growers. Canadian officials say they haven't received a noncompliance notice from China relating to soybeans. But a lobbying group representing Canadian growers highlighted the increased risks and urged members to be on the lookout for enhanced testing.

QUOTABLE

IN OTHER NEWS

U.S. housing starts rose 5.7% in April. (WSJ)

Amazon.com Inc. became the largest investor in British food-delivery company Deliveroo as part of $575 million funding round. (WSJ)

Defunct New England Motor Freight Inc. is preparing to sell thousands of semi-tractors and trailers in the largest bankruptcy auction of its kind. (WSJ)

The price of iron ore surged to a five-year high, buoyed by mine closures in Brazil and strong demand for steel in China. (WSJ)

Iron-ore giant Vale SA warned authorities it faces another potential tailings-dam burst. (WSJ)

Six more states are suing Purdue Pharma LP over its alleged role in fueling the opioid epidemic. (WSJ)

Malaysia's economic growth slowed in the first quarter as U.S.-China trade tensions took a toll on exports. (Nikkei Asian Review)

First-quarter profit at South Korea's Daewoo Shipbuilding & Marine Engineering fell 14% on declining sales. (Lloyd's List)

Container ship lessor Seaspan Corp. sealed a $1 billion financing program that could be used in part to buy new vessels. (Lloyd's List)

A.P. Moller-Maersk A/S is integrating warehousing and other landside activities at APM Terminals into Maersk LIne. (Journal of Commerce)

China's Dalian Shipbuilding Industry Co. may start building large liquefied natural gas carriers. (Splash 247)

Infrastructure conglomerate Adani Group will invest $290 million to develop a container terminal along Myanmar's Yangon River. (The Hindu)

Deutsche Post AG's DHL Express and Chinese drone-maker EHang are testing airborne delivery in Guangzhou. (Air Cargo World)

A Nevada developer is building a 558,000-square-foot warehouse complex in the Lehigh Valley area. (Allentown Morning Call)

Cargo thefts in the U.S. increased 25% by volume in the first quarter. (Commercial Carrier Journal)

ABOUT US

Paul Page is editor of WSJ Logistics Report. Follow the WSJ Logistics Report team at: @PaulPage , @jensmithWSJ and @CostasParis. Follow the WSJ Logistics Report on Twitter at @WSJLogistics.

Write to Jennifer Smith at jennifer.smith@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
ADIDAS -0.90% 263 Delayed Quote.45.53%
ADIDAS AG (ADR) End-of-day quote.
EURO / BRAZILIAN REAL (EUR/BRL) 0.22% 4.3576 Delayed Quote.-1.97%
GAP INC -0.11% 17.66 Delayed Quote.-29.27%
NIKKEI 225 -0.52% 21176.13 Real-time Quote.6.21%
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EBIT 2020 1 124 M
Net income 2020 930 M
Finance 2020 248 M
Yield 2020 5,53%
P/E ratio 2020 7,43
P/E ratio 2021 8,00
EV / Sales 2020 0,39x
EV / Sales 2021 0,37x
Capitalization 6 683 M
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