1) Less than Truckload - 7 – 13 % Savings – The theme facing the LTL industry is one of uncertainty. What will prices do?  Will YRC survive?  Will shippers start to increase the amount of freight shipped?  Conflicting reports exist that predicts rates will both go up and continue to decrease. Market statistics support the fact that carriers cannot raise rates by saying the industry is picking up. According to the ATA, seasonally adjusted tonnage fell by a half of a percent in July. This marks the twelfth straight month of declines, bringing freight levels to the lowest since July 2002. Since the LTL industry can be classified as “mature” with slow growth, that means carriers are not competing for new business, they are looking to take market share away from their competition.  In the past few quarters, it has been observed that some carriers are being extremely aggressive with their pricing in order to secure freight; however, after several months of operating at such discounted levels, the carriers realize that their rates are unsustainable and are trying to raise them. Shippers should examine the financial performance of their incumbent carriers in order to arm themselves if they are approached by their incumbents for rate increases.  Shippers should avoid being perceived as inflexible to the plight of their incumbents and potentially risk being dropped when the market turns around. The biggest uncertainty in the industry is the survival of YRC. Many say that if the company can survive the first quarter of 2010, when freight typically slows down from the holiday rush, they should survive in the long run. If YRC does not survive, the impact should not be immediately felt, as the extra capacity in the industry would be able to cover their freight; however when freight demand does increase, their exit would be an impetus for rate increases.

2) Ocean Freight – 6 – 12% Savings - Through the rest of this year, import traffic is expected to be weak due to the slow peak season.   The traditional slump that is seen after the holiday season should allow for shippers to have an extended sourcing season compared to the four or five month window that has been seen in past years. The two busiest ports in the United States have been down for almost two years now. This year alone, the Port of Los Angeles is down 18.3 percent year-to-date, and the Port of Long Beach is down 18.3 percent year-to-date. In the latest Port Tracker issued by the National Retail Federation and HIS Global Insight, predictions for year end results have been revised from 12.3 million twenty-foot equivalent units (TEUs) to 12.5 million TEUs. Even if the predictions hold true and the year end results turn out to be better than expected, annual volumes will be down 17.7 percent annually and at the lowest levels since 2003. Reflecting the low volumes, carriers have been aggressive with freight rates during negotiations. However, implementation times have been reduced to less than 30 days, as carriers are eager to move freight as quickly as possible.

While the overall ocean freight industry remains a shippers market, just like other modes there are several critical items that shippers need to be aware of.  Spot rates are extremely volatile right now.  As many carriers have right-sized their fleet to meet current market demand, the shippers are being forced to pay a premium through spot rates to secure capacity. Even though the peak shipping season is expected to be sluggish, carriers are implementing a peak season surcharge in order to guarantee capacity, since many of the large or mega vessels have been parked in favor of the small, more economical vessels. Additionally, ports are reducing their hours of operations to help minimize losses which has affected gate times, and in turn will affect overall transit times moving freight inland. Lastly, many carriers who negotiated rates in good faith have realized the agreed upon rates are just unsustainable and have tried to issue multiple General Rate Increases (GRIs). Shippers need to be aware of the validity of their contracted rates, while balancing the relationship with their incumbent carriers and understanding their plight could eventually affect service levels.

3) Small Parcel – 5 – 11 % Savings - Similar to other modes of transportation, the small parcel industry has reflected signs of recovery; however, the landscape of the industry in this category has forever been changed by the recession. The shift from air to ground that originated from cost cutting methods is trending towards a permanent change, which means air density will not likely return to its highs. Factors that will impact the recovery of small parcel that shippers should monitor include global trade and business-to-consumer shipments. International packages are predicted to grow faster than domestic shipments, but this is clearly dependent on the health of global trade. Low margin shipments of business-to-consumer shipments are showing a stronger growth pattern than business-to-business, which will directly impact carriers’ margins.  Savings may be eroded from other areas to make up for losses.  Despite these factors, the negotiating power will continue to reside with the shippers, but it is important to be diligent and knowledgeable about the factors that will directly affect the recovery of the industry.  Shippers should pay even closer attention to accessorial costs, as these charges are how carriers can quickly make up for lower freight rates.

4) Air Freight – 7 – 9 % Savings - The airfreight industry had seen month-after-month decreases, but in the last few months, those decreases have dampened.  For the first time in several quarters, all global regions saw an improvement in demand in August compared to July. Latin America and the Middle East saw actual increases in demand of 3.9 percent and 3.0 percent respectively, while the rest of the regions saw improvements in declines. Asia Pacific improved month over month from minus 9.5 percent to minus 9.0 percent. North America improved to minus 12.1 percent, European carriers improved to minus 14.5 percent,  and African carriers have improved to minus 5.1 percent. As freight seems to have stabilized, many carriers have stopped the massive rebalancing of supply and demand that has plagued shippers over the last year. Shippers will need to still monitor capacity, particularly on major trade lanes, but it will be less critical than in the past year. The International Air Transport Association (IATA) has even predicted growth of 5.5 percent in 2010.

5) Truckload – 5 – 10 % Savings – The truckload industry seems to be on the path toward recovery – albeit a slow recovery.  The American Trucking Association’s seasonally adjusted For-Hire Truck Tonnage Index increased 2.1 percent in August, which was the same increase seen in the previous month. The overall index stands at 104.1, the highest level since February 2009, yet still almost ten percent below last year’s levels. Many are taking these increases as signs that the industry is back on the right road, even if the pace of increases are moderate. Carriers should expect to continue to see slight increases, and maybe even a few decreases in freight month-to-month, as the economy tries to steady itself; however, analysts are predicting that the road to recovery will be a long one. Based on previous recoveries after economic crises, supply and demand should not reach equilibrium until early 2011. As it stands now, the industry still has excess trucks on the road, and carriers are hesitant to remove any additional capacity for fear that they will not be able to capitalize on market changes fast enough when freight demand does start to pick up. This leaves the truckload market a shippers’ market, with shippers in firm control of pricing.