Pricing across the transportation modes

By Elizabeth Baatz, Thinking Cap Solutions -- Logistics Management, 9/1/2006

TRUCKING:

Average prices charged by truckload carriers decreased 0.4% in July, but that did little to offset the inflationary effects of the previous four months. Recall that in June, TL service had hit a record high, with prices standing 28.6% above our 2001 benchmark price levels. Even with July’s numbers in hand, TL tags remain 28.1% above the benchmark. As for LTL, average prices fell 0.15%. This means that buyers of LTL services were paying 102.5% more than they paid on average in 2001. But beware: The LTL market could be under greater pressure than usual because prices on other receipts earned by the trucking companies dropped 2% from June to July. Overall, prices charged by all trucking companies decreased 0.1% and ended up 19.2% higher than 2001 price levels.

Prices charged by domestic airlines increased 0.9% on average from June to July, but keep in mind that this number includes prices for passenger tickets.When we look at just prices for flying cargo and mail on scheduled airlines, we see another story. Here prices increased 1.5%. Exclusive of mail, these prices actually increased 1.7% and were up 9.1% from price levels set in July 2005.That’s interesting, because July wholesale prices for jet fuel sold by U.S. refineries were down 4.1% from the previous month (but were still up 25.3% from the same month a year earlier). That suggests that shippers who use domestic airlines were not benefiting from the recent drop in jet fuel cost, but they at least have escaped the fuel cost inflationary boom of the past year to some degree.

Inflation trends in the water transportation sector are flooding shipping budgets again and again. In July, average prices charged by the entire sector increased 2% from a month ago and 6.9% from the same month a year earlier. Everyone contributed, although prices for deep-sea transportation were up just 1.5% and 1.8% over the same period one month ago and one year ago, respectively. Price hikes on the Great Lakes-St. Lawrence Seaway registered increases of 1.4% and 9.6% for those same periods. But it’s the barge operators who are sticking shippers with the biggest price increases. Prices for inland waterways freight transportation (except towing) jumped 8.5% from June to July and are up 36.4% from July 2005. Reportedly, equipment shortages are pushing prices off the scale.

Underinvestment in equipment and rail lines coupled with labor-cost concerns continue to show up in higher prices for rail cargo service. In July, average prices for intermodal service jumped 2.4% from a month ago and 10.7% from the same month a year earlier. In addition, prices for carload service increased “only” 0.4% and 10.5% during those time frames. Shippers have handled high prices in the carload market for some time. What’s new now is the extent to which inflation is besetting the intermodal segment. In the 12-month period ending July 2006, tags for intermodal service were up 9.9% from the previous year. That blows away the 0.9% and 2.1% respective inflation rates that we saw in the 12-month periods ending in July of 2005 and 2004.