Parcel shipping: UPS rolls out 2010 rates
Rate changes are comprised of an average increase of 4.9 percent for UPS Ground packages and an average net increase of 4.9 percent on all air express and U.S. origin international shipments
Jeff Berman, Group News Editor -- Logistics Management, 11/22/2009
ATLANTA-Late last week, UPS announced rate changes for 2010 that will take effect on January 4.UPS officials said the rate changes are comprised of an average increase of 4.9 percent for UPS Ground packages and an average net increase of 4.9 percent on all air express and U.S. origin international shipments, with the rate increase for the latter based on a 6.9 percent increase in the base rate minus a 2 percent reduction in the air and international fuel surcharge index. In 2009, UPS Ground rates saw a 5.9 percent increase and a 4.9 increase for air
UPS' 2010 Rate and Service Guide will be available on the company's Web site on December 18.
The company also said that on January 4 fuel surcharge tables for air express and ground services will be adjusted "to better align Air and Ground Fuel Surcharges and will substantially reduce the volatility of air surcharges when fuel prices fluctuate."
Parcel Research Principal Doug Caldwell told LM that the changes UPS made to its fuel surcharges are significant in that it is the first time they have been changed in years, along with the fact that these changes have narrowed the gap in the huge disparity between air and ground surcharges.
"It is good news if you are an air shipper, because your fuel surcharges will go down, but ground fuel surcharges will go up," said Caldwell.
To view this from a cost perspective, in 2009 the UPS Ground fuel surcharge for diesel fuel at $2.75 per gallon was 4.25 percent. But in 2010 that fuel surcharge will be 5 percent and on the higher end the fuel surcharge will go up from 9 percent to 11 percent for $4.25 diesel.
And on the UPS Express side, the 2009 UPS Express fuel surcharge was 18.5 percent for diesel at $2.75 per gallon. But in 2010 the fuel surcharge will decrease to 14.5 percent.
"In the past there has been such a disparity between ground and air that when shippers looked at the fuel surcharges, it had them saying they cannot ship by air anymore...and in the last year shippers paid a big premium for express air shipments," said Caldwell. "The interesting thing will be to see what FedEx does for fuel surcharges-by deciding to change their index to stay in line with UPS."
These rate changes follow a previous announcement by UPS' main competitor FedEx, which call for FedEx subsidiary FedEx Express to increase 2010 shipping rates by an average of 5.9 percent for U.S. domestic and U.S. export services, effective January 4. But-like FedEx did for its air express and U.S. origin international shipments-the 5.9 percent increase will be offset 2 percent by adjusting the fuel price at which the fuel surcharge begins by two percentage points. This is lower than the 6.9 percent increase for 2009 that FedEx introduced last year. FedEx Ground 2010 rate changes have not been released yet.
The FedEx and UPS 2009 rate hikes were the largest ever announced, said Jerry Hempstead, president of Hempstead Consulting. Part of the reason they were able to do this was because of DHL's exodus from the U.S. domestic parcel market, effective January 30, 2009.
And earlier this month, the United States Postal Service said it will raise rates an overall 3.3 percent price, on average, for Priority Mail and a 4.7 percent increase for Parcel Select, the USPS' bulk shipping ground product.
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