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Betting on Rail Trade; Seeking Steel Tariffs; Trimming the Tree Outlook By Paul Page
The $28 billion deal that created the Canadian Pacific Kansas City forged the only freight railroad that directly connects Mexico, the U.S. and Canada. It marked the ultimate bet on the promise of the free flow of goods in an intricate supply chain that underpins North American trade.
It is a bet that has gotten a lot riskier, The Wall Street Journal's Esther Fung reports, with President-elect Donald Trump's threat to impose new tariffs on Mexico and Canada and potentially upend distribution networks that have been built stretching from coastal ports to inland freight terminals. Trump's election sparked a selloff in CPKC's shares, a sign of the unease in markets over business deeply tied to cross-border trade.
CPKC boss Keith Creel and his executive team have been trying to reassure shareholders that the logic of its network still holds. The railroad merger is part of the billions of dollars in investment that has been funneled into cross-border trade, including new warehouses and transport connections tied to the nearshoring trends bringing more manufacturing to Mexico.
Michigan State University professor Jason Miller says he doesn't expect freight companies that have invested in the trade prospects to walk away over the uncertainty triggered by new tariffs. Union Pacific, which also has access to Mexico through six gateways on the southern U.S. border, says it would be able to handle any disruptions in supply chains.
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Economy & Trade
Not all companies are sweating over President-elect Donald Trump's aggressive plans for tariffs. Steelmakers want the threatened levies to go even further, and are looking for tariffs to be reimposed on steel from the U.K., the European Union and Japan. The WSJ's Bob Tita reports that the Steel Manufacturers Association says new duties would boost the domestic steel market and help address trade-distorting practices that it believes other countries are conducting. The response in a bedrock industrial sector is one sign of corporate America's complicated reaction to the possible renewal of heated U.S. trade relations. Steelmakers said the tariffs Trump imposed in 2018 helped lift U.S. steel prices, boost profits and expand payrolls. Companies since then have opened new mills and expanded others, adding millions of tons of steel-production capacity. Mexico accounted for 4.2 million tons of imported steel in the U.S. last year, second only to Canada.
Tariffs would likely drive up the price of steel and aluminum in the U.S. because Canada and Mexico are major suppliers of those metals. (WSJ) Quotable Commodities
There's little joy in the supply chain for Christmas trees this holiday season. Growers have been coping with root rot, scant labor, foreign competition and inflation on everything from seeds to tractors. The WSJ's Valerie Bauerlein reports that was before Hurricane Helene wreaked havoc on a region of North Carolina that is a major source of Christmas trees . There should be enough supply for anyone who wants a real tree this year, but Helene's impact will affect the industry for years to come. Many of the trees that were damaged were several years from maturity, pressuring supply in five or six years. The industry is also up against shifting consumer habits away from live trees. There is increasingly stiff competition from China-made artificial trees. The number of trees harvested in the U.S. has declined 30% since 2002, even as the American population has grown 16% over that period.
Number of the Day In Other News
Factory activity in the U.S. contracted in November for the eighth straight month, but a measure of new orders expanded. (WSJ)
Manufacturing conditions across much of Asia improved slightly midway through the fourth quarter. (WSJ)
Construction spending in the U.S. rose 0.4% in October to a record high. (MarketWatch)
General Motors is backing out of a nearly completed electric-vehicle battery plant in Michigan and offloading its stake to Korean partner LG Energy Solution. (WSJ)
The U.S. introduced new restrictions on exporting advanced semiconductors to China. (WSJ)
Europe's Delivery Hero is shifting its Glovo subsidiary in Spain from gig workers to an employment-based model. (WSJ)
Harry & David's annual production of 20,000 tons of comice pears reaches a peak during the holiday period that demands an intensive logistics effort to reach customers. (WSJ)
Singapore Post is selling its Freight Management business in Australia to a private-equity firm for more than $650 million. (WSJ)
Denmark is buying a majority stake in Copenhagen Airports for about $4.54 billion. (WSJ)
Big parcel carriers are adding hefty surcharges at an unprecedented pace this year. (Bloomberg)
An analysis shows "Italian" tomato purees sold at U.K. supermarkets appear to contain tomatoes picked under forced labor in China. $(BBC.AU)$
Indian steelmaker JSW is launching its own electric-vehicle brand. (Financial Times)
Canadian electric truck and bus maker Lion Electric is halting operations at an Illinois plant and laying off half its remaining workforce. $(CBC.AU)$
Cold-storage operator Lineage acquired Kansas-based Coldpoint Logistics for $223 million. (Seafood Source)
Boeing projects that India's air cargo market will quadruple over the next 20 years. (The Loadstar)
DHL Supply Chain bought a controlling stake in U.K.-based e-commerce fulfillment specialist Brandpath. (Logistics Manager)
Truck trailer maker Faymonville Group is building its first U.S. trailer manufacturing facility in Little Rock, Ark. (Trucking Dive)
A sprawling speculative $500 million logistics campus outside Chicago remains mostly empty amid dimming warehouse demand. (The Real Deal)
A ransomware attack on supply-chain software giant Blue Yonder is still disrupting some customers almost two weeks after the outage began. (TechCrunch)
About Us
Paul Page is editor of WSJ Logistics Report. Reach him at [paul.page@wsj.com].
Follow the WSJ Logistics Report team: @PaulPage , @bylizyoung and @pdberger . Follow the WSJ Logistics Report on X at @WSJLogistics .
This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
December 03, 2024 07:07 ET (12:07 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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