Source: Elizabeth Baatz, Thinking Cap Solutions. E-mail: ebaatz@ice-alert.com

Our new trucking price index is set to equal 100 in 2001. Each chart point indicates rising or falling price trends relative to the 2001 base period. In May 2004 the index stood at 106.8; in other words, prices were up 6.8% from 2001's levels. The trucking industry overall raised prices 0.7% from April to May, its fifth consecutive increase. With fairly steady inflation the rule for the next 12 months, the index should reach 108.7 by early 2005. The big push is coming from truckload carriers. TL prices rose 0.7% in May, the eleventh consecutive price hike in that sector. LTL prices, meanwhile, increased 0.3% in May on the heels of a 0.5% price cut in April.

In May, average prices for shipping on scheduled flights remained unchanged from April, but were down 4.2% from a year ago. These are margin-busting times, with the price of jet fuel sold by U.S. refineries rising 8.2% and 44.6% over the same periods. More worrisome for the airline industry: In the three-month period ending in May, air cargo prices fell 2.2%. That was the sharpest three-month drop since May 2001, and it effectively wipes out the price gains the industry garnered in the first quarter of 2004. Air couriers seem to be faring a bit better. In May, domestic and international air courier prices were up 5.6% and 4.1%, respectively, from year-ago levels.

Overall water transportation prices in May increased just 0.6% from the previous month and 0.4% from a year ago. That may seem sedate, but this sector has seen some rough seas. After we rebased the water transportation price index to 2001, the index stood at 130.7 in May. That means ocean and inland waterways prices have increased 30.7% from average price levels in 2001. Luckily for shippers, water transportation is long past its cyclical pricing high point. At its peak, in the 12 months ending October 2003, prices were up 20.4% compared to the previous 12-month period. By the year ending May 2004, prices were up just 13%. Our forecast shows average prices rising 5.9% in the 12 months ending December 2004.

Railroads pushed through a 1% average price hike in May. The last time we saw anything of that magnitude was back in September 2001, when prices jumped 1.3%. This latest increase was worse, however, because it came on the heels of a 0.4% hike in April and a 0.6% jump in March. This trend inevitably will lead to an upward adjustment in next month's forecast. For now, we continue to call for a 2.7% annual price hike in 2004. Shippers of farm products faced the biggest budget problems as prices for hauling farm products increased 2.8% from the previous month and 10.5% from a year ago. Shippers of primary metal products saw a sharp 3.5% one-month price increase in May, but those prices were up just 1.5% compared to a year ago.

Average prices for corrugated boxes nationwide rose by 2.3% in May, the largest one-month gain since April 2000. Part of that was to offset a 0.4% rise in box manufacturing costs that was fueled by higher paperboard costs.

The rest of May's gain enhanced industry profitability, adding $1.42 to margins for every $100 worth of product sold. Still, margins remain well below year-ago levels.

But strong demand fundamentals should give box manufacturers the confidence to hike prices further and lift industry margins out of the doldrums. Year-over-year growth in the end markets that buy boxes hit 1.6% in May, the best gain since March 2001.