LTL CARRIERS TAKE AIM AT RATES.
By: Phil Sneed
(TANDEM LOGISTICS NEWS FEED 7/23/11/11): Price increases at UPS Freight and ABF signal resolve among carriers ahead of the peak shipping period.
For a quick gauge of where truck pricing is headed, check tire prices.
Tire manufacturers such as Michelin and Bridgestone are jacking up the price of truck tires and retread rubber this summer by 9 to 12 percent. Prices increase reflect the rising cost of raw materials such as natural rubber and petrochemical-based synthetics, driven up by overseas demand.
UPS Freight started the July 4 holiday with its own fireworks, a 6.9 percent general rate increase. ABF Systems quickly matched UPS Freight with its on 6.9 percent increase.
Financial analyst Ed Wolf of Wolfe Trahan in New York expects other LTL carriers to follow UPS Freight and ABF “with similar mid-single-digit GRI’s over the next several weeks.”
“For the first time in 11 quarters, we expect each of the public LTL’s other YRC Worldwide to be profitable in the second quarter”, Wolfe Trahan said in a note to investors.
With a 6.9 percent increase, shippers with “good contracts” might see absolute rate increases of 2 to 3 percent, once discounts are accounted for says Mike Regan, president of TransAct Technologies, Elmhurst, IL.
Behind trucking’s stronger pricing power in the truckload and LTL segments is a shortfall in available capacity. There were far fewer trucks to haul freight in the second quarter of 2011 than before the recession. Equity research firm Stifel Nicolaus estimates the truckload sector lost 20 of its capacity during the recession because of bankruptcies and downsizing.