LTL Rates Rising, But So Are Costs

Less-than-truckload pricing is rising, financial results from the largest LTL carriers show, buoyed by tightening capacity and increased freight volume despite uncertainty about the course the economy will take over the next few quarters.

Shippers should brace for even higher LTL rates in the fourth quarter and 2012, said transportation analyst David Ross of Stifel Nicolaus in Baltimore. “Little price is translating into margin expansion, as costs are also rising quickly," he said in a written report.

LTL carriers won contract rate increases in the mid-single digits in the third quarter, according to quarterly earnings reports and investment analysts. General rate increases on non-contract business as high as 6.9 percent saw little discounting.

In the third quarter, higher rates were reflected in increases in revenue per hundredweight or yield that ranged from the low single digits up to 15.9 percent at ABF Freight System and 13.7 percent at Old Dominion Freight Line. UPS Freight increased its yield 13.4 percent, Con-way Freight, 12 percent, Saia, 11.6 percent, YRC, 7.5 percent and Roadrunner Transportation System, 10.6 percent.

Those figures include revenue from fuel surcharges. Excluding surcharges, ODFL increased its LTL yield increased 7.8 percent and Con-way Freight 6.7 percent.

Con-way Freight, the second-largest U.S. LTL carrier, is winning “reasonable” price increases from shippers as contracts come up for renewal, Con-way CEO and President Douglas W. Stotlar said in a Nov. 4 earnings conference call.

“We’re holding our GRI well” and contract rate increases are in the mid-single digit percentage range, said Greg Lehmkuhl, president of Con-way Freight. However, Year-over-year comparisons will get tougher in the fourth quarter, he said.

LTL pricing is “firming” as trucking companies maintain “discipline,” YRC Worldwide CEO James Welch said in a Nov. 5 earnings conference call. “The dynamics within our industry are encouraging compared to the last several years.”