Market Watch
Staff -- Logistics Management, 10/1/2001
Trucking
Average prices for all trucking services increased only 0.1% between July and August. Less-than-truckload (LTL) carriers, though, pushed through a 0.9% July-to-August price hike. Despite that jump, price escalation for LTL shipments actually is slowing. In the 12-month period ending with February 2001, prices rose 7.0% on average. In the 12 months ending with August 2001, price escalation slowed to 6.4%. In general, shippers will see moderate inflation in the months ahead. Overall prices for trucking services rose 4.1% in 2000; we estimate those prices will increase 3.3% in 2001 and 2.4% in 2002.
Trucking
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| General freight—local | +0.5 | +1.6 | +2.5 |
| Less-than-truckload | +0.9 | +0.5 | +2.7 |
| Truckload | -0.3 | +0.5 | +1.6 |
Water
All was calm on the high seas in August. Compared to July, average pricing for deep-sea foreign transportation increased just 0.1%. Inbound service saw a 0.1% increase and outbound pricing remained flat. Prices for shipping over the Great Lakes and St. Lawrence Seaway increased a meager 0.1%. The only waterway shippers had to worry about was the Mississippi. Shipping rates for Ol' Miss increased 2.3% between July and August. After their 8.5% jump in 2000, we forecast all-water transportation rates will rise 5.0% in 2001 and 1.7% in 2002.
Water
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| Inbound liner | +0.1 | +16.5 | +18.1 |
| Outbound liner | 0.0 | -3.3 | -7.7 |
| Domestic deep sea | 0.0 | +2.9 | +4.0 |
| Grt. Lks.-St Lawrence | +0.1 | -0.3 | +0.9 |
| Mississippi River | +2.3 | -3.5 | +0.2 |
Rail
Railroads have gotten braver about raising prices. In the 12 months ending with August 2001, average rail prices increased 1.7%, compared with a 0.7% price hike in the previous 12-month period. Shippers of processed food products and metal ores saw some of the biggest jumps between July and August, with average rates increasing by 0.9% and 3.9%, respectively. With a recession brewing, though, railroads won't be able to push through big price hikes any time soon. We forecast linehaul rates will rise 1.4% in 2001 and 0.4% in 2002.
Rail
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| Coal/Petroleum | 0.0 | -0.3 | +0.9 |
| Chemicals | -0.1 | +0.8 | +0.1 |
| Farm products | -0.8 | +0.2 | +1.8 |
| Motor vehicles | -0.1 | +0.1 | +1.9 |
| Metallic ores | +3.9 | +2.5 | +3.6 |
Air
It's hard to say what the impact of the Sept. 11 terrorist attacks will be on the cost of shipping by air. Average prices for shipping via scheduled airline flights in August did not change from July 2001 levels and were 6.1% higher than August 2000 levels. With the economy entering a recession, pressure normally would be on airlines to reduce prices. But big cuts in service may instead result in upward pressure on prices. Air couriers, meanwhile, pushed through a 1.4% price hike for international service between July and August.
Air
| % CHANGE VS.: | 1 month ago | 6 mos. ago | 1 yr. ago |
| Scheduled air cargo (property) | 0.0 | +0.2 | +6.1 |
| Domestic air courier | 0.0 | +2.2 | +4.2 |
| International air courier | +1.4 | +3.2 | +3.9 |
Carrier Costs and Demands Affecting Transportation Service Prices
Fuel
Despite uncertainty about what lies ahead, oil futures traders predict transportation fuel prices will fall. Expected slowdowns in trucking volumes and air travel mean demand for fuel will likely slump, pushing prices downward. The global recession also will pressure oil producers to hold prices steady. As a result of cuts in crude oil prices, average prices for all refined petroleum products fell 6.4% in August compared with year-ago levels.
Transportation Equipment
A global recession and cuts in air travel have aircraft manufacturers rethinking their pricing strategies. U.S. manufacturers have had modest success in increasing prices recently; in the 12-month period ending with August 2001, aircraft engine and parts prices increased 3.1% and aircraft producers managed to raise average prices by 4.8%. But the forecast is clear: The days of price hikes that exceed cost increases are over.
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