US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

Acquisition Shows Effect of High Lumber Prices on Pallet Industry

While there have been a number of articles about the effect of the lumber shortages on the housing market, much less has been said about how the national lumber shortage has affected other industries. For instance, a leading end use for lumber in the US is pallets. Indeed, with more than 90% of pallets in the US made from hardwood and softwood lumber, the shortage of lumber has severely affected the pallet industry. Many sawmills have been prioritizing shipments to home builders and big-box retailers – who have more purchasing power – leading many pallet producers and retailers facing critical shortages of pallet cants and other lumber components needed to fix and repair pallets. Not only can firms produce fewer new pallets, but firms’ ability to repair damaged pallets has also been affected by the lumber shortage – companies unable to obtain replacement cants are faced with the difficult choice of cannibalizing one pallet to repair several others.

A recent acquisition announcement shows how one firm in coping with the shortage of lumber. Kamps – one of the nation’s leading pallet repair and management firms – announced that it would purchase Buckeye Diamond Logistics, a firm that also provides pallet repair and management services. The acquisition:

  • expands Kamps’ national pallet stock – a key consideration when firms are looking to lease as many pallets as possible to ensure timely shipment of their goods
  • boosts the company’s network of pallet repair and maintenance facilities
  • increases Kamps’ inventory of trailers used to haul pallets, making it better able to quickly shift pallets to a customer experiencing a temporary shortage
  • adds to Kamps’ purchasing power – some sawmills will only sell to firms willing to buy large quantities of lumber

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Pallets and Global Pallets. Freedonia Custom Research is also available for questions requiring tailored market intelligence.


Mergers & Acquisitions Are Booming in 2021: Key Factors Driving Increased Activity

M & A activity has been very busy this spring. Across a wide variety of industries, we’re seeing a range of announcements from market leader combos to roll-ups of smaller, regional operations. But what’s behind this rise in activity?

Here are a few key factors driving acquisition and divestiture activity across the economy in 2021:

  • Owners of smaller firms are looking to retire after their businesses’ survived the COVID-19 pandemic (or in some cases, these businesses struggled and owners did not want to rebuild).
  • Certain industries with high pandemic-era sales (e.g., construction goods suppliers, home improvement distributors/retailers, packaged food companies, grocers, lawn and garden equipment and supplies firms) are flush with cash and high stock values and are looking to expand.
  • Pent-up interest from the limited activity of 2020, as transactions that were planned or considered pre-pandemic were put on hold due to economic uncertainty or the difficulty of completing due diligence when you aren't traveling. Some of these previously planned transactions are now going through.
  • Expectations of higher tax rates are leading some firms to cash out now or to make shifts that put them on better footing.
  • SPACs (special purpose acquisition companies) are being increasingly used for acquisitions to expand existing public or private companies.
  • Companies are reevaluating their business operations in the post-pandemic era and are sometimes making changes to what they see as their core operations, or are building on key capabilities that have grown over the course of the pandemic.

Freedonia Group analysts are keeping watch across a wide variety of industries for changes that portend market movements and shifts in the competitive environment.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Chemicals      Construction & Building Products      Consumer Goods      Covid-19      Energy & Petroleum      Food & Beverage      Industrial Components      Machinery & Equipment      Packaging      Plastics & Other Polymers      Services      Textiles & Nonwovens    

Strong Pallet Market Buffeted by Supply Chain Crises

The recent blockage – albeit temporary – of the Suez Canal demonstrated how tenuous the global supply can be, threating shipments of thousands of items worldwide. However, another item is as critical to the global economy as a giant freighter – and equally in peril: the humble pallet. Demand for pallets has risen over the past year as shipments of construction materials and numerous industrial products have remained strong, even during the COVID-19 pandemic. Furthermore, as more and more consumers shop from home, pallets are in demand to handle the vast number of packages shipped to and from warehouses and distribution centers.

However, as a recent article demonstrates, the swelling market for pallets is threatened by a series of challenges:

  • Surging lumber prices and a shortage of available lumber stock have made it difficult for wood pallet manufacturers to obtain the main raw material for their products.
  • Increasing nail prices – more than 100 can be used to assemble each pallet – have further driven up pallet costs.
  • Labor shortages – from workers needed to assemble pallets to the truckers needed to transport them to manufacturers and shippers – have producers scrambling to find employees to assemble and repair pallets and deliver them to customers.

While wood pallets will remain the leading pallet material going forward, rising costs and a lack of supply may encourages to use plastic pallets. Though more expensive, pallets made from plastic offer end users a number of advantages, such as lighter weight and the ability to be used for many trips before requiring repair or replacement. More importantly for suppliers, plastic pallets are more readily available than those made from wood.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Pallets and Global Pallets. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Automotive & Transport      Covid-19      Industrial Components    

Biden Administration to Investigate Global Supply Chain Issues

On February 24, US President Joe Biden signed an executive order mandating that federal agencies conduct a 100-day review of critically important supply chains, as the COVID-19 pandemic has raised focus on issues regarding access to certain products and materials generally sourced from abroad (and particularly those from China).  The review will focus specifically on four items, some of which have faced supply chain problems even before the pandemic:

  • Semiconductors:  Access to these chips, which are used for multiple purposes in motor vehicles and also are essential components of iPhones, personal computers, smart TVs, gaming systems, and more, increasingly became a problem during the pandemic. As remote working became more commonplace, demand for these chips increased greatly to accommodate the need for more personal computers and laptops. Additionally, trade restrictions placed on imports from China also caused difficulties, as many of China’s leading chip manufacturers had export restrictions placed on them by the United States. Additionally, some of these companies claim plans to expand manufacturing to the United States have been hindered by national security concerns raised by the Committee on Foreign Investment in the United States (CFIUS), due in part to the possible military applications of these products. The US-based Semiconductor Industry Association claims that the US’s share of global semiconductor manufacturing has fallen from 37% in 1990 to 12% today, and US manufacturers are pushing the White House to work with Congress to provide investment that they claim will support research and design operations and to increase domestic semiconductor production.
  • Pharmaceuticals: Shortages in certain drugs during the pandemic has also prompted a deeper examination into the pharmaceutical supply chain. A combination of increased demand for drugs to address the rising number of hospitalizations and the shutdown or slowdown of some international shipping ports led to key shortages. There are also concerns about being too reliant on China for key pharmaceutical ingredients, which has doubled over the last decade
  • Electric vehicle batteries: Global manufacturing of electric vehicle batteries is currently heavily concentrated in China, with Japan and South Korea ranking numbers two and three leading manufacturers, and the US back at number six, according to a report from S&P Global. With major US automobile manufacturers increasingly focusing on electric vehicles – including General Motors, which has announced that it intends to phase out all gas-powered vehicles by 2035 – reliable access to these batteries will be crucial in the coming years. 
  • Critical minerals: Rare earth minerals are used in a wide variety of applications, including airplanes, steel, light bulbs, wind turbines, and many more. Supply chain issues for these minerals long predate the COVID-19 pandemic, as China is the leading global producer of rare earth minerals. This problem of production being so heavily concentrated in a single country has been intensified by some of the Chinese government’s behavior in the past, including a brief restriction of rare earth exports to Japan in 2010 in response to a dispute in the East China Seas. These concerns have led to increased efforts from the rest of the world to ramp up rare earth mineral production, which has lowered China’s share over the last decade from around 98% down to 63%. In a continuation of efforts from the Obama and Trump administrations, Biden’s executive order will examine means of addressing weaknesses in the rare earth minerals supply chain. This will likely include both strengthening the US rare earth mineral industry and transitioning reliance on imports to countries with whom the US has friendlier reliance – primarily meaning a transition away from China.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

  Automotive & Transport      Construction & Building Products      Consumer Goods      Covid-19      Energy & Petroleum      Food & Beverage      Industrial Components      Machinery & Equipment      Metals      Packaging      Plastics & Other Polymers      Tariffs      Textiles & Nonwovens    

Challenges Await to Biden Administration’s Made-in-America Push

The Biden administration has expanded on the “Buy American” trend pushed by the Trump Administration by signing the “Made in America” executive order, which, among other things, called for:

  • increasing the cost saving threshold required for federal contracts to purchase from non-US suppliers
  • stricter enforcement of existing Buy American policies, including closing loopholes that allowed companies to offshore manufacturing while continue to qualify for domestic preferences, for example by having 51% of a product’s materials sourced domestically

The goal of these policies is to ensure that taxpayer-funded federal spending is used to invest in domestic manufacturing, create US jobs, and strengthen national security. However, these policies are likely to face challenges – particularly in the short term – such as:

The impact of the Made in Executive order has the potential to become far more substantial should the Biden administration be able to sign into law vast infrastructure and/or energy bills, which would vastly increase the amount of federal spending impacted by the new regulations.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.