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 Transportation Outlook: A Shifting Marketplace in 2007  
 Release Date 1/23/2007     
   
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  Transportation Outlook: A Shifting Marketplace in 2007
   
  The transportation economy looks decidedly different heading into 2007 than it did just one year ago. NASSTRAC takes a quick look at the challenges and opportunities involving each mode.
   
  In 2006, NASSTRAC members said their top challenges were capacity, transportation costs, customer demands, and fuel surcharges. Although these remain at the top of the list for many, market forces that were unfavorable to shippers last year seem to be shifting. That being said, given the current economy some uncertainties remain as shippers and carriers look at certain key trends dominating the transportation agenda in 2007. What are some of these concerns?

Cargo security will continue to be an issue, particularly with newly empowered Democrats who are promising to push air cargo screening, and the moves by the Department of Homeland Security on rail and maritime anti-terror initiatives. Energy and its impact on transportation costs continues to be top-of-mind with many NASSTRAC members, even if crude oil prices are moderate and keep diesel prices at tolerable levels. So what’s the outlook specifically in each transportation market segment?

Over-The-Road Trucking. After experiencing difficulties getting capacity and paying premium prices in 2005 and 2006, shippers are starting to see some relief and have started reporting that their carrier partners are offering price cuts. While shippers benefit from weaker prices, some predict that may be tempered by fewer transportation options as carriers look to consolidate and the industry continues to grapple with a driver shortage. Heavy demand for freight transportation for the past two years has given motor carriers unprecedented pricing power, and heavy fuel surcharges allowed them to recoup out-of-control fuel costs. But the driver shortage has constrained truckload capacity growth in the long-haul truckload sector, and has pushed some volume over to the LTL market.

Air Cargo. Capacity is not expected to strongly impact air cargo pricing this year. But that’s tempered by the fact that the price of jet fuel will still play a role in determining overall pricing, particularly the surcharges that airlines pass on to their customers. Also, some users of air freight transportation are concerned about a new Democratic-controlled Congress that includes lawmakers who are bitter about the handling of air cargo security under Republican control and who are anxious to pass new mandates for 100 percent screening of belly cargo.

Rail Transportation. Railroads have weathered without much trouble a spreading slump in freight traffic that has raised alarms in the trucking industry. Railroads have run strong profits, kept up their pricing, and project greater capital spending for 2007. The first half of the year could see slower rail loadings after a flat 2006 peak shipping season, but analysts say rail lines are carefully managing capacity to protect profits. Shippers who rely on rail will continue to face strong rate hikes.

Ocean Shipping. International shippers who begged for capacity in 2005 got it from ocean carriers in 2006—and now some container lines are watching profits plummet following a peak season that didn’t peak. Some say that shippers of ocean containers who are now negotiating annual contracts can expect to duke it out with carriers that are determined to compensate for last year’s low rates. In the meantime, others say that the industry can expect consolidation as container shipping lines reengineer networks to better balance capacity.