M&A activity in the transportation and logistics sector was driven by an increase in trucking deals as larger companies looked to increase market share. Consolidation is being driven by overcapacity in shipping as larger players attempt to reduce competition and create more efficient economies of scale. Looking ahead to 2015, a decline in fuel costs could result in improved profitability and spark increased M&A activity.
According to First Research, an industry research organization, with plummeting crude oil prices driving diesel prices lower, operating costs at trucking companies are falling dramatically. Retail diesel prices in the US, which averaged $3.82 in 2014, hit a four-year low at the end of the year. Prices are expected to average only $3.07 per gallon in 2015, which could result in diesel surcharge savings of as much as $24 billion, according to Bloomberg. Reducing surcharges should free up trucking companies to raise shipping rates, which would help them cover rising salary and health care costs.
High levels of warehouse absorption in the US indicate an increased demand for warehouse space, driven by growing e-commerce activities. More than 160 of the 210 largest US warehouse markets showed positive net absorption – an increase in the amount of warehouse space occupied – in 2013 versus 2012. Overall in those markets, 162.6 million square feet of warehouse space was occupied in 2013, an increase of nearly 40 percent from 2012, according to CoStar. Much of the demand for warehouse space is directly related to e-commerce, a sector that’s growing globally by about 20 percent annually.
Posted by Doug Nix.