Pricing Across the Transportation Modes

By Elizabeth Baatz, Thinking Cap Solutions -- Logistics Management, 12/1/2005

TRUCK

Our overall 2006 trucking price forecast has been revised to 6.4% thanks to stronger than expected recent price hikes. Truckload tags in October were up 1.6% from September and up 6.8% from year-ago levels. That was the highest inflation rate on record since the Labor Department began releasing its survey in June 1992. LTL trucking companies haven’t handed shippers price breaks either. From year-ago levels, LTL rates were up 8.5% in October, slowing only slightly from 8.7% the previous month. Specialized long-distance trucking companies that use tankers, refrigerated trucks, and the like also pushed through a big price hike. Here rates in October were up 2.8% from September and up 9.7% from year-ago levels.

% CHANGE VS.:	1 month ago	6 mos. ago	1 yr. ago
General freight - local	-0.5	2.9	5.5
Truckload	1.6	3.2	6.8
Less-than-truckload	0.5	5.1	8.5
Tanker & other specialized freight	1.5	3.9	6.4

AIR

Like trucking, our price forecast for domestic airfreight service has been revised upward. We have calculated a worst-case scenario of an 8% price hike in 2006 and a best-case of 3.5%. As a result, we are forecasting average prices will be up 5.8% for shipping on scheduled U.S. airlines next year. The latest month’s data for October 2005 showed an industry that had enough clout to hit shippers with a 0.6% price hike on the heels of a painful 2.1% increase in September. Compared to a year ago, rates were up 7.9%. This implies shippers aren’t winning battles for negotiated cuts in fuel surcharges. The same is true for air couriers. Prices for domestic and international air courier service were up 7.5% and 7.8%, respectively, from October levels a year ago.

% CHANGE VS.:	1 month ago	6 mos. ago	1 yr. ago
Scheduled air freight	0.6	5.0	7.9
Chartered air freight & passenger	-0.1	1.7	5.3
Domestic air courier	0.9	1.6	7.5
International air courier	0.3	1.4	7.8

WATER

Thanks to river transportation trends, our price forecast for all vessels now stands at 8% in 2006. After September’s 20.4% one-month surge in prices for shipping freight on the Mississippi and other inland waterways, we had expected rates to come crashing down. A mere 3% price cut in October, however, could not put prices back on the pre-Katrina track. We expect average prices for inland shipping will fall another 5.5% in November and 3% in December. Nonetheless, this will leave prices stranded 20% above where they were at the end of 2004. Because of inflation pressures that existed before the hurricane season, shippers who use river barges will see tags at the end 2006 floating 9% above mid-August 2005 price levels.

% CHANGE VS.:	1 month ago	6 mos. ago	1 yr. ago
Deep-sea freight	1.3	1.5	1.4
Coastal & intercoastal freight	1.0	4.1	14.0
Grt. Lks.-St. Lawrence Seaway	0.4	2.4	5.1
Inland water freight	-3.0	22.5	21.9

RAIL

Both carload and intermodal service providers sought to protect themselves from the margin-eroding effects of soaring fuel prices. In October 2005, average transaction prices for hauling carloads of grains, metals, lumber, and automobiles increased 1.5% from the previous month and 12.6% from the same month a year ago. That inflation rate wasn’t surprising, as prices for carload rail service have been rising from year-ago levels at a 10% to 13% rate in each of the last six months. What was unusual (albeit long expected) was the fact that intermodal prices finally picked up steam in October, increasing 3.5% from the previous month and 16% from the same month a year ago. These trends justify the upward revision in our rail price forecast.