Truckers get aggressive on LTL pricing
Market watchers, truckers: Now is the time to bid out contracts
By Dave Hannon -- Purchasing, 10/29/2008 11:52:00 AM
With volumes declining and the outlook showing no signs of recovery, trucking carriers—especially less-than-truckload carriers—are reporting major declines in pricing, indicating now is a good time to talk rates with LTL carriers.
A recent report from Goldman Sachs analysts on the trucking market says that “pricing remains competitive as certain carriers are vying to gain share” in the slowing U.S. freight market. Goldman Sachs analysts also point out that as the fragmented trucking market continues to report slowing volumes, larger competitors “will price aggressively to gain share.” Credit Suisse analyst Christopher J. Ceraso forecasts that freight tonnage demand might fall for five more quarters, which “does not bode well for the less-than-truckload group as a whole.”
Most LTL carriers have already reported decreased tonnage and declining LTL rates in third-quarter results. In its third-quarter report, LTL giant YRC’s CEO Bill Zollars says, “Throughout the third quarter, the operating environment progressively weakened resulting in lower than expected volumes and more competitive pricing.”
ABF says in its earnings statement that in the first half of the year, its freight tonnage seemed to stabilize compared to 2007, but “during this year's third quarter, tonnage levels decelerated for each month of the quarter as the freight environment weakened further."
On its most recent earning call, officials from Con-way said in its LTL segment, “Price competition increased as the quarter progressed, and when yields are adjusted for a longer average length of haul and some shift in the mix of freight, pricing was clearly weaker than at the same point last year.” In fact, Con-way officials say that according to its records “we could not find any time in Con-way's 25 year history where September's tonnage per day was actually below that level in August” as it was this year. LTL carrier Saia also says its third-quarter LTL shipments were down 2.3% and that “third-quarter revenue was negatively impacted by a weak economy, the competitive pricing environment.”
And the outlook is for even slower demand and plunging LTL rates. David Ross, an analyst at investment firm Stifel Nicolaus, said less-than-truckload carriers expect the fourth quarter should be worse than the third. And Earl Congdon, executive chairman of LTL carrier Old Dominion Freight Lines, said in a recent report that we believe the competitive pricing environment may intensify in the fourth quarter
See also: Truckers cut back capacity after 3Q demand dive
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