With air freight posing an unacceptable risk for some shippers, many are turning to rail. Demand for rail equipment, therefore, will likely jump, which means buyers will face a tougher pricing environment. Although rail equipment manufacturers haven't raised prices much in recent years, they were able to boost prices by more than 1.7% in August and September. Buyers should brace themselves for further price hikes in January.

Corrugated Boxes

Prices for corrugated boxes fell in September by 0.4%, the largest one-month decline since January 1999. At the product-line level, prices dropped even more. For example, prices for shipping containers for paper products fell 1.7%. Meanwhile, year-over-year growth in end markets slowed to just 2.0% in September. Yet despite poor market conditions, we expect box prices to firm up in the months ahead.

Shippers that rely on trucking took another hit to their budgets in September. According to the Bureau of Labor Statistics, the average rates charged by truckload carriers increased 0.5% between August and September 2001. Average less-than-truckload (LTL) rates, meanwhile, rose 0.3%. Despite those increases, we aren't revising our pricing forecasts much because we think recessionary pressures will limit price hikes over the next 15 months. Our current forecast calls for prices to rise 3.3% in 2001 and 2.4% in 2002.

In September, average prices for water shipments jumped 10.9% compared with prices from a year ago. Who's making waves? It should come as no surprise that deep-sea inbound foreign transportation rates are rocking the boat. In September, average prices for inbound deep-sea service jumped 22.2% from August's levels and soared 42.7% above September 2000 prices. As a result, we are revising our 2001 water transportation rate forecast upward to a 7.2% average price hike, replacing our previous forecast of a 5.0% increase.

Average prices for rail freight increased 0.1% between August and September and are up only 1.4% from September 2000 levels. Nevertheless, some shippers have seen big price hikes. In September 2001, rates for hauling metal ores jumped 8.5% compared with year-ago levels. Over the same period, pricing for food products and lumber increased 4.1% and 2.4%, respectively. These numbers reflect surveys that were conducted before Sept. 11, so we may have to make some upward revisions to our overall rail forecast soon.

The Bureau of Labor Statistics' September survey of aircargo and air-courier operators shows conflicting price trends. Average prices for scheduled air cargo dropped 2.6% between August and September 2001. Prices for air-courier service, by contrast, held steady over the same period and increased 3.9% between September 2000 and September 2001. The long-term effect of the Sept. 11 terrorist attacks will likely be to push prices higher as the costs of tighter security, increased paperwork, and higher insurance rates are passed along to customers.

Rail Equipment