Price Trends
Pricing Across the Transportation Modes
By Elizabeth Baatz -- Logistics Management, 8/1/2007
Source: Elizabeth Baatz, Thinking Cap Solutions. E-mail: ebaatz@ice-alert.com
Trucking
The trucking industry appears to be idling at a crossroads. Price escalation peaked at 5.7% in the final quarter of 2005. Since then, prices have continued to increase, but at a decreasing rate. Following the same cyclical pattern demonstrated in 2001, our forecasting shows prices for trucking will hit its lowest inflation rate of 2% in Q3 of 2007. That near-term outlook appears assured. Will inflation in trucking pick up again in 2008? Our current forecast suggests shippers might escape without a significant rebound in inflation. Truckers will be chasing fewer loads and opportunities to push costs to shippers will become more scarce. Overall prices are forecast to be up only 1.6% in 2008.
| % Change vs. | 1 month ago | 6 mos. ago | 1 yr. ago |
| General freight - local | -0.1 | 3.5 | 3.4 |
| Truckload | 0.0 | 0.0 | 0.4 |
| Less-than-truckload | -0.4 | 4.3 | 2.4 |
| Tanker & other specialized freight | -0.1 | 0.6 | 1.0 |
Air
After an unprecedented 4.4% one-month price hike this past May (for flying cargo on scheduled flights), airline companies just couldn’t hold on to the pricing power. Average prices fell only 0.8% in June. Looking at inflation trends over time, this industry has been sliding down a cyclical hillside. Over a 12-month period, airline industry prices for flying property and mail peaked at 6% in the first quarter of 2006. By the second quarter of 2007, pricing was falling at a 0.4% pace. We forecast these prices will hit bottom with a 1% price decline in Q3 of 2007. In 2008, airlines will see cargo pricing bounce around. All told, airfreight transportation tags will rebound to hit a 2.6% rate in 2008.
| % Change vs. | 1 month ago | 6 mos. ago | 1 yr. ago |
| Scheduled air freight | -0.8 | 2.3 | -0.7 |
| Chartered air freight & passenger | -0.2 | 2.2 | 7.3 |
| Domestic air courier | 1.1 | 2.5 | 4.5 |
| International air courier | 1.0 | 2.2 | 6.2 |
Water
Annual inflation rates for all waterway freight transportation services hovered around 5% from Q4 of 2005 to Q3 of 2006. That was an unusually stable and lengthy plateau with no historical precedent. Thus, a forecaster’s dilemma is born. Taking a page from the other transportation markets, we have hedged our bets by assuming a modest cyclical slowdown in water transportation prices through the end of 2007, followed by four quarters of relative stability in 2008. Our forecast for water transportation prices calls for a 1.1% price hike in 2007 and a 1.4% increase in 2008. Next month, a more in-depth review of price trends in the sub-sector markets (deep sea, inland waterways, etc.) will allow a more nuanced forecast.
| % Change vs. | 1 month ago | 6 mos. ago | 1 yr. ago |
| Deep-sea freight | -2.8 | -2.4 | -3.2 |
| Coastal & intercoastal freight | 0.0 | 6.1 | 10.0 |
| Grt. Lks.-St. Lawrence Seaway | 1.2 | 5.4 | 8.0 |
| Inland water freight | 6.2 | 3.1 | 4.1 |
Rail
The scuttlebutt among besieged shippers may be that railroads hold all the power of a monopoly, but price trends data from the U.S. Bureau of Labor Statistics begs to differ. In Q1 of 2006, railroads pushed through a whopping 11.5% 12-month escalation rate. Since then, however, prices have been on a cyclical trend down. By Q2 of 2007, railroad industry price escalation had slowed to 4.6%. Our forecast shows prices continuing the slide in 2007 before steadying in the year ahead. If we are correct, that means shippers who rely on the rail freight market can expect average prices to hit 1.4% in 2007 and 1.6% in 2008. Next month, we’ll examine the price outlook for intermodal versus carload.
| % Change vs. | 1 month ago | 6 mos. ago | 1 yr. ago |
| Rail freight | 0.9 | 1.5 | 0.6 |
| Intermodal | 0.2 | 2.8 | 2.7 |
| Carload | 0.9 | 1.2 | 0.1 |
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