Logistics Report: DHL Isn’t Buying; Uncanny Metal Making; States Eye Gas Taxes

Date: Monday, March 18, 2019
Source: The Wall Street Journal

Mergers and acquisitions activity looks very different from the top of the logistics market. Deutsche Post AG chief Frank Appel says its DHL group’s position as the world’s largest forwarding and supply chain provider and as a top air express carrier leave the business little room to take part in broader industry consolidation. Deutsche Post DHL is the sector’s second big player to say in recent months it is steering clear of the M&A market, following XPO Logistics Inc.’s withdrawal as a potential buyer, and the WSJ Logistics Report’s Jennifer Smith writes that leaves consolidation in logistics up to smaller operators trying to climb the market-share ladder. DHL isn’t ruling out a return to acquisitions to fill some gaps, in keeping with the focus of the biggest players on so-called bolt-on businesses. But Mr. Appel says valuations for the sector’s technology-focused startups are simply too high right now.

Aluminum scrap heaps in the U.S. are getting steeper thanks to the shifting economics of manufacturing. American companies are recycling fewer used cans for the beverage market and instead making higher-margin flat-rolled aluminum for automotive and industrial components, the WSJ’s Bob Tita reports. That’s left food and packaging companies turning to more costly imported aluminum even even as they face pressure to embrace recycling. Producing aluminum for cans isn’t nearly as profitable as rolling sheet for car companies, creating challenging economics elsewhere in supply chains. The glut of used cans shows how calls for more recycling can fall short if remaking them into new products isn’t profitable enough. It’s a concern across the recycling business: Paper and plastic scrap prices have collapsed since China toughened standards on imports of those products, and Beijing added a 50% tariff last year on imports of aluminum scrap from the U.S.

Government & Regulation

The race to raise fuel taxes is taking place far from Washington. Ohio Republican Gov. Mike DeWine is pushing for an 18-cent-per-gallon increase in the state’s gas tax, the WSJ’s Kris Maher reports, making him the latest in a series of state leaders looking at a tax increase to get more money for infrastructure. More than a dozen states have raised their gas taxes since 2013, and Michigan Democratic Gov. Gretchen Whitmer recently proposed tripling the state’s levy over two years. The states are moving while federal fuel taxes have remained static for a quarter-century and the U.S. Congress is unlikely to raise the level even as lawmakers consider calls for more highway infrastructure spending. That’s pushing more decisions on highway spending to states like Ohio, where transport officials say they face “a funding crisis” after finding a $1 billion spending gap that’s been masked by borrowing.

E-Commerce

Logistics improvements and shifting consumer habits are effectively building a new delivery sector. The share of Americans eating out at restaurants has fallen over the past two decades, the WSJ’s Heather Haddon reports, and more households are turning to delivery services rather than going out to eat or loading up supermarket carts. One research group says meals delivered from restaurants to homes rose 6% last year. Options are growing far beyond the pizza and Chinese takeout that’s been the bedrock of delivery as more restaurants tap into services that serve multiple businesses and build an audience online and in mobile apps. It’s a new version of the rise of air express for businesses in the 1970s, with consumers now tapping into more dependable and widely available food delivery services and opting for convenience over higher costs. 

 

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