Logistics Report

Tougher new environmental rules are set to hit the shipping industry. The world’s leading maritime nations are leaning toward setting rules to cut the sulfur in oceangoing vessels’ fuel by more than 85% in four years. The International Maritime Organization, the United Nations’ shipping regulator, begins meetings in London today on the emissions rule, and the WSJ’s Costas Paris and Nicole Friedman report they’ll decide whether to require the change as early as 2020 or push out the deadline by five years. The rules are aimed at reducing pollution from burning high-sulfur fuel oil that health officials blame for respiratory and heart diseases. It would cost around $40 billion for the industry to meet the new rules, and shipping executives say that the earlier deadline would have the outlays starting during one of the worst-ever downturns in the business. The other worry is supply: ship operators say they doubt there would be enough of the cleaner fuel to supply the industry even with the later deadline.

The puzzle pieces on the new global shipping map are starting to come together. The Federal Maritime Commission’s approval of the Ocean Alliance will allow that group of four big shipping lines to launch next April, WSJ Logistics Report’s Erica E. Phillips writes, in a challenge to the market weight of the 2M agreement between Maersk Line and Mediterranean Shipping Co. Those are the No. 1 and 2 carriers in global shipping by capacity, and the Ocean Alliance France’s CMA CGM, China’s Cosco Group, Hong Kong’s Orient Overseas Container Line and Taipei-based Evergreen Marine, will put carriers in the second tier on some common ground. FMC members say they’re assured that safeguards in the new alliance will prevent anti-competitive moves. But commercial cooperation involving so much capacity will raise pressure in the market and push the next level of operators to match the cost efficiency of their bigger competitors.

The unraveling of Hanjin Shipping Co.’s landside operations is underway. The bankrupt South Korean container line is asking for court approval to close its European operations and plans to start shuttering the offices, including its regional headquarters in Germany, as early as this week, the WSJ’s In-Soo Nam reports. The court in South Korean had been considering how to sell the entire company, but Hanjin now looks clearly on a path toward breaking apart. In the U.S., the carrier is in talks with Swiss shipping giant Mediterranean Shipping Co. to sell its stake in the Long Beach Terminal, the WSJ’s Costas Paris reports. The talks involving Hanjin’s 54% stake in Total Terminals International LLC, which runs the Southern California site, come as Hanjin is looking for buyers for the ships in its dwindling fleet. Korean peer Hyundai Merchant Marine Co. may have first refusal on those vessels in a Hanjin breakup that is looking more like a liquidation than a restructuring.

Consolidation among aerospace suppliers is picking up speed as aircraft manufacturers push to move aircraft off the assembly line at a faster pace. A new agreement by Rockwell Collins Inc. to buy B/E Aerospace Inc. for $6.4 billion would unite two of the global industry’s biggest suppliers, the WSJ reports. It extends a drive to team up in the aerospace industry as suppliers adjust to pressures from Airbus Group SE and Boeing Co. to speed up production as they work through a backlog of more than 10,000 jets. The deal would lift Rockwell into the elite tier of suppliers serving production for planes ordered during a seven-year “super cycle” for the industry. Buying B/E Aerospace gives Rockwell a bigger share of spending on new jets and more opportunities in the more profitable business of refitting older planes.

US Foods Holding Corp. will try to keep up the pace of its food distribution operations with far less back-office support. The nation’s second largest provider of food and other supplies to restaurants and cafeterias plans to eliminate hundreds of jobs as it responds to changes in commercial food business that are rolling across distributors, the WSJ’s Annie Gasparro reports. The operator of 62 distribution centers is slashing costs after its plan to merge with rival Sysco Corp. was foiled by antitrust regulators last year. Both businesses are being hurt by historically thin profit margins as broad trends in the food industry reshape supply chains. Hundreds of regional distributors and specialty, high-end suppliers are challenging the economies of scale of the big national companies and vying for the business of independent restaurants. At the same time, falling food costs are reducing the value of the inventory that US Foods and its peers hold.