Pricing Across the Transportation Modes

By Elizabeth Baatz, Thinking Cap Solutions -- Logistics Management, 7/1/2006

% Change Vs.:	1 month ago	6 mos. ago	1 yr. ago
General freight - local	1.7	3.4	4.8
Truckload	1.4	1.1	3.6
Less-than-truckload	2.2	6.1	9.1
Tanker & other specialized freight	0.7	1.8	5.5

TRUCK:
The trucking industry pushed through an overall 1.4% price hike from April to May, thanks to fairly aggressive behavior by the less-than-truckload (LTL) segment of the marketplace. Average transaction prices (including fuel surcharges) for intercity LTL service increased 2.2% in May, which matched April’s 2.2% gain. Assuming a modest 1.5% rollback in June, LTL tags will still be up at least 7.8% in the second quarter of 2006 compared to the same period a year ago. Shippers can expect to see strong inflationary trends in trucking through the rest of 2006 and 2007. We now forecast average aggregate prices in the trucking industry to increase 4.6% in 2006 and 3.5% in 2007. LTL prices will accelerate much faster—up 6.8% in 2006 and 6% in 2007.

% Change Vs.:	1 month ago	6 mos. ago	1 yr. ago
Scheduled air freight	0.1	3.3	7.6
Chartered air freight & passenger	1.6	5.0	6.9
Domestic air courier	0.7	3.1	7.6
International air courier	0.0	7.0	13.7

AIR:
Average prices for shipping freight on scheduled airline flights inched up a mere 0.1% in May. That meager price hike followed a whopping 2.4% increase in April, so shippers’ budgets aren’t exactly out of danger. We estimate that compared to the same quarter a year ago, airfreight tags will be up 7.5% in the second quarter of 2006. That will be the sharpest price hike since mid-2003. By the time 2006 has been put to bed, average airfreight tags will have accelerated 6%. That will slow somewhat in 2007, which will follow with a 4.6% annual price hike. High fuel costs, of course, provide the lift for airline industry inflation. The prices for jet fuel purchased from U.S. refiners surged 52% from May 2005 to May 2006. During that same period, air transport support-service companies raised their prices for fuels and lubricants by 27%.

% Change Vs.:	1 month ago	6 mos. ago	1 yr. ago
Deep-sea freight	0.0	0.0	0.8
Coastal & intercoastal freight	-1.1	1.9	6.7
Grt. Lks.-St. Lawrence Seaway	1.3	5.1	7.7
Inland water freight	3.7	5.5	20.1

WATER:
An inflationary riptide has the water transportation industry in turmoil. After two months of price declines in March and April, average prices charged by U.S.-based barges and container operators increased 0.4% in May. Compared to May 2005, prices were up 4.6%. The real culprits behind this trend are the inland waterways carriers. Their average prices surprised with a 3.7% price hike in May. That meant tags for inland waterways shipping were up 20.5% from the same month a year earlier. With this kind of action already on the books, we are hard-pressed to lower our forecasts any further. We expect year-on-year price hikes in the last quarter will stick at 3.3% for both 2006 and 2007.

% Change Vs.:	1 month ago	6 mos. ago	1 yr. ago
Rail freight	0.4	1.5	8.7
Intermodal	2.6	4.3	10.2
Carload	0.1	1.1	8.4

RAIL:
The bulk carload segment of the railroad industry seemed to have taken a break from its helter-skelter price hikes in May, pushing through a meager 0.1% price hike that month. After 1.4% and 1.6% monthly price jumps in April and March, respectively, buyers of carload services probably felt relieved. But if those shippers also had to purchase intermodal space, they would have quickly lost any good feelings. In May, average prices for intermodal service increased 2.6% from April; that added up to 10.2% jump from May 2005. For the four-month February-to-May period, prices charged by intermodal carriers increased 8.5%. Our short-term forecast calls for all rail prices to slow from a 9% year-on-year inflation rate in 2006 Q2 to 8.5% in Q3 and 4% in Q4.