Pricing Across the Transportation Modes

By Elizabeth Baatz, Thinking Cap Solutions

By Elizabeth Baatz, Thinking Cap Solutions -- Logistics Management, 11/1/2005

TRUCK

Last month we reported that prices charged by long-distance truckers increased from July to August by only 0.1% for truckload carriers and fell 0.3% for LTL. One astute reader wanted to know if that meant carriers essentially absorbed the skyrocketing cost of diesel fuel. The answer: No such luck. The government survey collects data from U.S. trucking companies around the middle of every month. So if diesel fuel prices skyrocketed in the last two weeks of August, the BLS data would not reflect any added fuel charges until the September data has been released. In fact, prices for TL and LTL service did take off, up 1.5% and 1.8%, respec-tively, from August to September. The current forecast predicts prices for all trucking services will be up 5.4% in 2006 following a 5.6% average annual hike in 2005.

% CHANGE VS.:	1 month ago	6 mos. ago	1 yr. ago
General freight - local	1.2	2.2	6.8
Truckload	1.5	2.3	5.9
Less-than-truckload	1.8	5.7	8.7
Tanker & other specialized freight	1.8	2.7	4.9

AIR

In the first three quarters of 2005, we’ve seen a sharp acceleration in inflation for airfreight ser-vice on scheduled domestic airlines. In the second and third quarters of 2005, prices were up compared to the same period a year ago by a respective 6% and 4.6%. That’s a far cry from the anemic and downright deflationary moves in 2004, when prices actually fell 3.2% in the second quarter. We have modeled two possible scenarios: One assumes airlines will continue to hike prices, but in the second half of 2006 the rate of escalation will slow sharply. This will lead to a 3.5% price increase in 2006 after a 4.5% increase in 2005. But if the rate of price escalation continues on its current course unabated, then next year will bring a rate hike of 8% or higher.

% CHANGE VS.:	1 month ago	6 mos. ago	1 yr. ago
Scheduled air freight	2.2	5.0	6.2
Chartered air freight & passenger	1.1	1.9	5.3
Domestic air courier	0.2	2.1	7.4
International air courier	0.3	3.3	8.3

WATER

Thank Hurricane Katrina for this one-month price hike. Prices for shipping on inland water-ways jumped 20.4% from August to September, according to Labor Department surveys. But the short-term disaster doesn’t account for the whole problem because those prices have been escalating at an increasing rate all year long. In fact, inland waterways prices grew at a 16.4% rate in the first nine months of 2005 compared to the same period a year earlier. By comparison, between 1999 and 2004, January-to-September price escalation averaged just 4.2%. Even assuming some sort of correction in the final quarter of 2005, prices for deep sea and inland waterways freight combined will be up 5% in 2005 and 8.2% in 2006.

% CHANGE VS.:	1 month ago	6 mos. ago	1 yr. ago
Deep-sea freight	0.6	-1.4	0.1
Coastal & intercoastal freight	1.0	6.9	13.4
Grt. Lks.-St. Lawrence Seaway	1.6	2.1	5.6
Inland water freight	20.4	24.4	32.8

RAIL

Intermodal traffic on U.S. railroads may have hit some weekly records this fall, but railroads that carry those trailers and containers haven’t been cashing in with big price hikes. In fact, ac-cording to transaction price surveys by the Department of Labor, intermodal prices were up only 2.3% in the first nine months of 2005 compared to the same time period a year earlier. That escalation rate was barely changed from the 2.2% rate seen in both 2004 and 2003. As for carload freight, prices escalated at a barn-burning 11.2% pace in the January-to-September period in 2005, up from 4.4% in 2004 and 2.1% in 2003. The forecast for all rail industry traffic calls for a 9.6% price hike in 2005 followed by a more reasonable 5.3% increase in 2006.