Pricing across the transportation modes

By Elizabeth Baatz, Thinking Cap Solutions -- Logistics Management, 11/1/2006

TRUCKING

Shippers who relied on LTL trucking service caught a break in September as average prices reported by long-distance carriers fell 0.7% from August. But that was only a temporary respite from an overall inflation trajectory that shows every sign of a steady upward path. In the final quarter of 2005, prices were up 6.8%. For the final quarter of 2006, we forecast LTL tags will be up 7.5% from the same period last year. Looking further ahead, in the final quarter of 2007, we foresee prices increasing at a 6.6% rate. Inflation rates for truckload service, however, will look more stable. Truckload prices will be up 3.7% in the last three months of 2006 compared to a year ago, and up again 3.3% in 2007.

TRUCK	1M	6M	12M
General freight - local	-0.3	2.4	2.8
TL	0.6	3.1	3.8
LTL	-0.7	2.7	4.4
Tanker & other specialized freight	0.1	1.4	3.9

AIR

Relative to other modes, airfreight prices are faring rather well. According to data reported by U.S.-based companies to the U.S Labor Department, prices for cargo on scheduled airline flights increased only a modest 0.1% from August to September. But with competitive pressures high and passenger price hikes failing to pick up the slack (passenger fares fell 10.8% in September), we are forecasting average prices for cargo will be up 5.3% in the final quarter of 2006 compared to a year earlier. That follows a 6.9% price increase in the fourth quarter of 2005 and will precede a more modest 3.3% price hike forecast for the closing quarter of 2007.

AIR	1M	6M	12M
Scheduled air freight	0.1	1.4	1.4
Chartered air freight (incl. passenger)	0.2	2.3	7.1
Domestic air courier	0.9	4.2	10.5
International air courier	0.8	3.9	17.0

WATER

The outlook for water transportation rates calls for inflationary pressures to abate somewhat. This will largely be due to a return to less volatile pricing by inland-waterways carriers. In September, on the heels of a 1.4% drop in August, we saw prices for inland-waterways shipping increase again by 1.2%. For the entire third quarter, these prices were up 22.7% from the same period in 2005. By the time the fourth quarter is over, inland-waterway tags will be up 12.9%, followed by a 7.6% hike in the final quarter of 2007. These increases may seem high, but it is a noticeable improvement from the 18.8% year-ago price increase registered in the fourth quarter of 2005.

WATER	1M	6M	12M
Deep sea freight	0.8	0.3	0.9
Coastal & intercoastal freight	1.2	3.4	7.4
Great Lakes - St. Lawrence Seaway	0.3	1.7	7.9
Inland water freight	1.2	11.5	15.3

RAIL

As for rail transportation rates, the industry relented a bit by cutting average prices for intermodal service by 0.2% from August to September. Prices for carload service, meanwhile, more than made up the slack by increasing 1.1% at the same time. All calculated together, average rail prices were up 9.7% in the third quarter of 2006 compared to the same quarter a year earlier. When the final quarter of 2006 has been counted, we predict, prices will be up another 6.1% from a year ago and up again by 4.1% in the last quarter of 2007. Whether or not this course of moderation in rail rates holds true will depend on a slowdown in economic activity.