Stifel: LTL rates to remain low through first quarter
Fuel surcharges are less of a concern in negotiations with carriers this year
Dave Hannon -- Purchasing, 10/21/2009 12:55:11 PM
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A note this week from Stifel, Nicolaus & Co. says rates for less-than-truckload services will remain low into the first quarter of next year, "unless YRC shuts down or other carriers exit" the market. That's good news for freight buyers but also means carriers "on the bubble" could struggle with another quarter of lower revenues, putting them at risk.
Good news for both carriers and shippers is that fuel surcharges aren't wreaking nearly as much havoc on costs as they did a year ago. For example, in the second quarter of 2008, carrier fuel surcharges were averaging an astounding 33%. In the second quarter of this year, they averaged 13.6%, according to Stifel's research.
"With average fuel surcharges today well off highs of last
summer and back close to 16% and accounting for roughly 12% of the average
shipper's bill, they are less i
mportant today in pricing negotiations," Stifel
analysts say. "Volatility in fuel prices is not good for carriers' margins or
shippers' budgets, in our opinion, because it does not allow for proper pricing
or planning."
Stifel analysts say, "In 2010, LTL volumes might pick up only modestly (1%-2% growth), below our 3%-5% estimate that is based on potential inventory restocking, or surprise somewhat on the upside due to better-than-expected economy (5%-6% growth). Either way, freight should slowly rise at a discount to economic growth (~2% tonnage growth) in 2011."
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