UPS Freight Hikes Rates 6.9 Percent

UPS Freight will take a 6.9 percent general rate hike Aug. 1, a move that could signal a stronger across-the-board increases in less-than-truckload pricing.

The rate hike — the largest LTL general rate increase in recent years and the first from a major carrier this year — will apply to non-contract rates and charges.

The move is likely to kick-start LTL pricing that has been increasing at a lower rate than truckload charges, as excess capacity slowly leaches from LTL networks.

It’s a sign that LTL supply and demand is moving closer toward balance, though “there’s still room to grow,” said Ira Rosenfeld, UPS Freight spokesman.

UPS Freight last took a general rate increase in September, hiking non-contract rates 5.9 percent. Customers largely accepted that increase, said Rosenfeld.

Rosenfeld said several factors contributed to the general rate increase, including rising fuel and equipment costs and a softer than expected economy.

Historically, LTL trucking companies hike non-contract rates at the beginning of the year. Last year several carriers took increases in the fall and winter.

Other LTL carriers are likely to follow UPS Freight with earlier-than-usual GRIs. FedEx Freight took a 6.9 percent general rate increase in November 2010.

UPS Freight’s move could make it easier for companies struggling to increase yield, such as YRC Worldwide, to get customers to agree to higher rates.

General rate increases don’t affect contract customers, who account for the majority of LTL freight, but they raise the pricing floor in contract negotiations.

Equities analyst Ed Wolfe of Wolfe Trahan & Co. said LTL volume growth has been slowing down in the second quarter but the field’s “pricing is going in the right direction as the largest carriers remain very focused on improving rates.”

Wolfe Trahan estimates average LTL carrier yield grew 4.9 percent in the second quarter following 2.8 percent growth in the first quarter.

Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter at @wbcassidy_joc