LTL Pricing To Remain Low

Rates charged by less-than-truckload motor carriers should remain low through the holiday season and into the first quarter of 2010, investment firm Stifel Nicolaus says.

In a note to investors, the firm’s transportation analysts said they expect LTL volumes to pick up 3 percent to 5 percent in 2010 as retailers slowly restock inventories.

The report noted fuel surcharges, and fuel costs, are far lower than a year ago, meaning they aren’t as much an issue in pricing and contract negotiations. And wIth demand low, there is still plenty of overcapacity in the industry.

Absent a stronger than expected increase in demand or sudden increase in fuel prices, the only likely trigger for higher LTL rates and revenue would be the exit of a major carrier such as YRC Worldwide, which has been struggling to rebuild its national and regional LTL business and avoid bankruptcy.

LTL rates could shoot up fast if YRC Worldwide went out of business, one transportation consultant warned, noting that YRC commands about 20 percent of the LTL market.

When former competitor Consolidated Freightways shut down in 2002, “within 90 days rates up were by almost 9 percent,” said Mike Regan, president of TranzAct Technologies. “If something were to happen to YRC, I wouldn’t be surprised to see rates go up at least as much,” he said.

Most observers say they don’t expect a bankruptcy filing in the short-term, however, though the carrier’s long-term prospects are challenging. It lost more than $500 million in the first half of 2009.

YRC Worldwide, is working to secure a new long-term agreement with its lenders and has received considerable support from its banks and the Teamsters union.

It releases its third-quarter results Oct. 30.

Contact William B. Cassidy at wcassidy@joc.com.