LTL pricing continues to show improvement
During the third quarter earnings season to date, it appears that less-than-truckload carriers are in a good groove, when it comes to pricing.
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During the third quarter earnings season to date, it appears that less-than-truckload carriers (LTL) are in a good groove, when it comes to pricing.
The early returns so far are evident, with LTL players Saia, Old Dominion, and ABF Freight System reporting year-over-year per hundredweight price gains of 11.6 percent, 13.7 percent, and 15.9 percent, respectively.
In part, these pricing gains stem from General Rate Increase (GRI) announcements for non-contract freight made by LTL carriers during the second half of this year, with increases coming in around 6.9 percent on average.
These rate increases came at a time when the LTL market is getting tighter in terms of both fixed capacity and variable capacity, which make up the sector.
And since the fourth quarter of last year, anecdotal evidence has suggested that many LTL carriers are seeing rates recover and are turning their attention to rate increases, following a challenging 2009 for the sector in which LTL carriers to a degree were highly focused on driving volume gains with pricing power largely diminished.
Since that time, LTL carriers have also seen marked improvements in pricing, volume, and weight per shipment in recent months, according to analyst reports.
An LTL executive told LM that there is no question that LTL rates are starting to firm up on the yield side and it has become a focus for carriers—with all having some sort of yield improvement process to raise rates in place.
“The LTL industry is finally getting its arms around pricing and profitability, which is being seen in improved results, and the operating ratios for those that have reported earnings are better than those being reports by truckload carriers,” said Satish Jindel, president of Pittsburgh-based SJ Consulting.
Jindel said LTL carriers are focused on finding customers that have had bad pricing, adding that customers should fully carriers to only carry freight that helps them turn a profit, which has not happened in the past, as some carriers were cutting rates to attract business while suffering financially.
But this does not mean that LTL carriers are strictly trying to make up for previous losses and getting control over pricing, as much as it is the industry recognizing carriers cannot remain in business without moving profitable freight, according to Jindel.
“What LTL carriers want is to provide quality equipment, quality service and to take better care of customers,” he said.
Dahlman Rose analyst Jason Seidl wrote in a research note that LTL fundamentals remain strong industry-wide, with those trends expected to continue in the fourth quarter.
About the AuthorJeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
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