Logistics Management: Price Trends
Pricing Across the Transportation Modes
Elizabeth Baatz -- Logistics Management, 4/1/2009
Source: Elizabeth Baatz, Thinking Cap Solutions. E-mail: ebaatz@alertdata.com
Trucking
After a surprising 8.1% LTL price hike in January, the latest surveys from the Bureau Labor Statistics shows LTL companies cut their transaction prices only 0.3% in February. Running counter to overwhelming weakness in truck tonnage, LTL prices still stand 3.4% higher than February 2008. TL companies, meanwhile, are bending with the prevailing recessionary winds. Average price tags charged by TL companies fell 0.2% in February, which was the sixth consecutive monthly decline leaving tags 3.8% below February 2008 levels. A look at the overall trucking price index suggests prices will end 2009 close to price levels seen in Q3 of 2007, essentially wiping out the fuel-driven price run-up of the previous year.
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| General freight - local | 0.9 | -7.3 | -1.2 |
| Truckload | -0.2 | -8.2 | -3.8 |
| Less-than-truckload | -0.3 | -0.2 | 3.4 |
| Tanker & other specialized freight | 0.7 | -5.0 | -0.3 |
Air
With a sharp 5.9% monthly price cut in February 2009, flying cargo on scheduled flights at last shows vulnerability to the global recession. It has been challenging to forecast a price index reported by the Bureau of Labor Statistics when the recent monthly prices were still jumping up 0.2% in January 2009 and up 2.6% in November 2008. After double-digit fuel-injected price hikes in the final three quarters of 2008, this survey data finally makes more sense. A new, lower take-off point for our forecast allows us to project prices for air cargo on scheduled flights to fall at least 4.5% in 2009. Next month we extend the forecast to 2010, which should yield more insights into the near-term air cargo price outlook.
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| Scheduled air freight | -5.9 | -7.8 | 5.9 |
| Chartered air freight & passenger | -2.9 | N/A | N/A |
| Domestic air courier | -3.1 | -17.0 | -5.8 |
| International air courier | -4.7 | -16.5 | -5.5 |
Water
U.S. companies that move cargo over water reported a 4.7% monthly price cut in February. That was the fifth consecutive monthly price drop, but this time it was supported almost entirely by a 11.4% price decline reported by deep sea freight companies. Coastal and intercoastal freight transport prices actually increased 2.1%, while inland waterway freight tags fell by a minor 0.4%. The February price cut gave us a new take-off point allowing a much more competitive 5.5% annual decline in water transportation prices in 2009. As the World Bank forecasts the global economy in 2009 will be struggling with its first recession in more than 60 years, there's every reason to suspect U.S. cargo ships will have to cut prices deeper than ever before.
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| Deep-sea freight | -11.4 | -20.6 | -3.6 |
| Coastal & intercoastal freight | 2.1 | -1.6 | -0.9 |
| Grt. Lks.-St. Lawrence Seaway | 0.0 | 0.7 | 6.1 |
| Inland water freight | -0.4 | -3.2 | 13.5 |
Rail
Railroad executives may spin a good story to Wall Street, but pricing trends reported by the U.S. Labor Department reveal how much trouble this industry faces in the recession. Rail prices declined 1.9% in February on the heels of a 4.3% drop in January. Worse still, when we look at rail industry price movements from the same month a year ago, we see tags dropped 4.3% in February and 2.8% in January. When carload and intermodal volume picks up, then prices will rebound quickly no doubt. But the year ahead will be rough for railroad companies as we forecast average prices to decline below year-ago levels in every quarter of the year ahead. Our revised forecast shows rail prices down 8.5% annually in 2009.
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| Rail freight | -1.9 | -11.4 | -4.3 |
| Intermodal | -2.0 | -17.1 | -8.4 |
| Carload | -2.0 | -11.0 | -4.0 |
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