Shippers Slightly Less Pessimistic; Intermodal Gaining Share

April 22, 2009
Freight volumes are still depressed, but shippers are more optimistic, says the 16th semi-annual Freight Pulse Survey by Morgan Stanley Research North America.

Still at one of the lowest levels in the history of the Freight Pulse Survey, Morgan Stanley points out that shippers were slightly less pessimistic in their outlook than the prior Freight Pulse Survey in October 2008. On a scale of 1 to 10 where 1 is “Recession” and 10 is a “Strong Economy,” shippers averaged a 4.4, slightly ahead of the 4.2 reported in the October survey. The index has been below 5.0 (No Change) since it recorded a 4.7 in March 2008.

Shippers do indicate orders are below or in line with 2008 levels. Only 16% said ordering is higher than prior-year levels. Inventories appear to have some room to decrease. A slightly higher percentage (29%) of shippers said inventories were above planned levels in the current survey. Only 26% indicated inventories were above planned levels in October 2008.

Rail shippers expect rate hikes and volume declines. Intermodal should continue to gain share based on improved service and cost savings over other modes. Trucking shippers say volumes are stabilizing and capacity is abundant. Aggressive pricing will contribute to intermodal gains over truckload.

Service spells revenue for rails. On average, 62% of rail shippers expect a rate increase in the next six months. Union Pacific shippers represent the highest number (68%) expecting an increase. Union Pacific is the most improved on service of the seven Class I railroads ranked. Morgan Stanley does point out that Union Pacific also appears to have the most legacy contracts left to re-price. At 18%, UP's rate of legacy contracts is double the next highest railroad, CSX (7%). Union Pacific shippers expect a 7.2% rate increase in the next six months, Burlington Northern-Santa Fe shippers expect 6.0%, as do Norfolk Southern shippers. For CSX, the expectation is a lower 5.3%, which declined from the expected 6.2% shippers projected in the October 2008 Freight Pulse Survey. Canadian National also declined in expectation from a 5.3% increase last October to a 4.8% increase currently. Canadian Pacific shippers expect only 3.7% increase in the next six months, and Kansas City Southern shippers say 3.8%.

When looking ahead six months, large shippers expect volume declines on all truck modes, down 1.3% on national LTL, 0.8% on truckload and 0.4% on regional LTL. Only intermodal shows an increase for large shippers, up 1.6%.

Smaller shippers see increases in volumes on all modes over the next six months, up 1.4% on national LTL, 2.0% on intermodal, 2.9% on regional LTL and 3.0% on truckload.

Pricing is a bit different. Larger shippers expect prices to drop on all modes, down 0.9% on intermodal, 1.3% on national LTL, 1.6% on regional LTL and 2.7% on truckload.

Smaller shippers may have less clout, they see declines only in intermodal pricing and then only 0.1%. Truckload pricing would rise 0.3% for smaller shippers while national LTL will increase 1.8% and regional LTL by 2.4% according to their six-month outlook.

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