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July 9 2018

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4 The Journal of Commerce | July 9 2018 "To be held to ransom like this by one truckers' union is not how a market economy is supposed to work." Mark Szakonyi WITH FUEL PRICES rising and freight demand soaring, shippers — from Brazil to China — are reminded of just how dependent they are on truck drivers and how much rockier it can get in terms of securing a haul. The reasons for delayed or stalled truck delivery vary, but they all point to increased pressure on what is often the weakest link for contain- erized supply chains, particularly those threaded through developing countries. Although an index tracking global truck tensions doesn't exist, a spate of unconnected flare-ups suggests something is awry. And shippers would be wise to brace for more with crude prices in the $80-per-barrel range. IHS Markit, parent company of The Journal of Commerce, forecasts oil will average $78 per barrel in the second half of this year and then decline to an aver- age of $74 per barrel in 2019. The jump in Brazilian diesel prices sparked the 10-day national truck strike in late May that crippled roads, highways, and ports, costing shippers between $5 billion and $15 billion, according to various estimates. Within two weeks, the average price for a liter of diesel rose 6.4 percent, to 3.83 realis ($1). The previous administration's subsidizing of new, environmental- ly friendlier rigs encouraged more drivers to enter the market, reducing driver operating margins and setting the stage for a backlash when higher diesel prices make their earning potential even slimmer. The average price per liter fell to 3.48 realis in the first full week of June after the administration of President Michel Temer reached a deal with Abcam (the Association of Brazilian Auton- omous Truck Drivers) to end the strike in exchange for a 60-day diesel price reduction and a reduction in road tolls, as reported by JOC Brazil- ian correspondent Rob Ward. Most troubling for shippers and carriers is that the Temer adminis- tration agreed to minimum freight rates for truckers on all govern- ment-associated contracts, a move critics say isn't only unsustainable but also violates transport contracts. "It is insane," a Sao Paulo-based auto parts shipper told The Journal of Commerce. "To be held to ransom like this by one truckers' union is not how a market economy is sup- posed to work." Truckers in Argentina flexed their muscle in a one-day strike on June 14, in a bid to increase pay 27 percent and boost fuel subsidies. Like Temer, President Mauricio Macri has been pushing tough reforms, though the unexpected jump in inflation has provoked pop- ular blowback. Although there's been limited reporting, largely due to state censor- ing, recent truck protests in China's inland provinces might be the most significant, in that they warn of domestic delivery restraints unless transport demand for e-commerce steps up. A number of local less- than-truckload drivers in Anhui and Jiangxi provinces called for a boycott of a trucking platform provider over mismanagement of their capacity, the China head of a global logistics provider told The Journal of Commerce. "We can't make a living any more now that haulage rates are under fierce competition and the die- sel price is 7 yuan (US$1.09) a liter ... We are also often randomly fined for traffic violations," one driver based in Yantai, Shandong province, told The South China Morning Post. The protests also point to Chi- nese workers' increased willingness to push back on employers, despite tough crackdowns on such actions and censors scrubbing mentions of protests, making it hard to coordi- nate with fellow protestors and draw greater attention to their cause. After a local hauler suspended service to Shantou port between Hong Kong and Xiamen in protest of various issues, including terminal inefficiency, the operator China Mer- chants pledged to improve fluidity. While encouraging stakeholders to come together, China Merchants also sent a stark warning to those who would strike or intimidate driv- ers that "the public security organs will resolutely crack down on and strictly deal with them under the current situation of 'eliminating the dark and eliminating evil' through- out the country," which is believed to be a reference to China's anti-cor- ruption campaign. Whether such threats can damp- en labor action remains to be seen. Geoff Crothall, a Hong Kong-based activist and China Labour Bulletin spokesman, told the South China Morning Post that tensions are rising. "In the next few months," he said, "I would expect to see more strikes like this, especially if fuel prices continue to rise and there is no meaningful or concrete response from the government." JOC email: twitter: @szakonyi_joc Fueling global truck tension The Journal of Commerce (USPS 279 – 060), ISSN 1530-7557, July 9, 2018, Volume 19, Issue No. 14. The Journal of Commerce is published bi-weekly except the last week in December (printed 25 times per year) by JOC Group Inc., 450 West 33rd St., 5th Floor, New York, N.Y. 10001. Subscription price: $595 a year. Periodicals postage paid at New York, N.Y., and additional mailing offices. © All rights reserved. No portion of this publication may be copied or reprinted without written permission from the publisher. POSTMASTER: Please send address changes to The Journal of Commerce, Subscription Services Department, 450 West 33rd St., 5th Floor, New York, N.Y. 10001. Letter From the Editor

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