TMCnet News
Q2 TD Cowen/AFS Freight Index: Parcel surcharge changes wring out additional revenue, LTL and truckload rates hold steadyOut-of-cycle parcel pricing actions drive greater yields, while rates in truckload and LTL stay flat as carriers hang on for freight cycle fundamentals to improve ATLANTA, April 9, 2024 /PRNewswire/ -- AFS Logistics, an industry-leading third-party logistics (3PL) provider, and TD Cowen announce the second quarter (Q2) 2024 release of the TD Cowen/AFS Freight Index, a snapshot with predictive pricing for truckload, less-than-truckload (LTL) and parcel transportation markets. The latest release of the index expects LTL and truckload rates to remain steady, consistent with trends established since Q2 of last year. In parcel, the index shows the effect of fuel surcharge increases and other accessorial changes to drive net rate growth in Q1 and Q2 2024, despite limited overall demand. "While truckload and LTL markets are largely a continuation of established trends, parcel carriers have unleashed a wave of key pricing changes to raise revenue," says Tom Nightingale, CEO of AFS. "After significant discounting to compete for falling package volumes last year, UPS and FedEx have deployed accessorial charges as more covert tools to increase yields, with changes to fuel, demand and delivery area surcharges targeted to boost revenue." Parcel: Discounting cools, off-cycle "GRI-style" pricing changes to boost revenue The ground parcel fuel surcharge is based on the U.S. on-highway diesel fuel index, and express is based on the U.S. Gulf Coast kerosene-type jet fuel. As of March 2024, the jet fuel index is up 40% since 2021, but during the same period, the express fuel surcharge for both carriers is up over 100% for both carriers. A similar discrepancy exists for ground, with the diesel index up 22% since 2021, but the ground fuel surcharge for both carriers is up over 75%. In express parcel, the effect of the GRI, fuel surcharge adjustments, a shift to more premium services and higher average billed weight more than offset carrier discounting to drive a significant net increase in cost per package in Q1 2024, jumping from 0.9% above the January 2018 baseline in Q4 2023 to 3.9% in Q1 2024. The index projects a slight increase to 4.1% in Q2 2024, in line with the "competitive but rational" parcel market described on the March FedEx earnings call, and an indication of carriers' desires to move away from the significant discounting they had previously used in the fight for market share. Ground parcel rate per package also saw a significant jump in Q1 2024, up from 23.8% in Q4 2023 to 28.8% in Q1 2024. Increased fuel surcharge and higher average billed weight fueled growth, and average discount remained flat after significant increases in previous quarters. In Q2 2024, the ground rate per package index is expected to reach 29.3%, nearing the index's historic high set in Q1 2023 and reversing the trend of three consecutive quarterly year-over-year (YoY) declines. Truckload: Rates remain low, but stable LTL: Carrier discipline runs up against soft demand About the TD Cowen/AFS Freight Index About AFS Logistics View original content to download multimedia:https://www.prnewswire.com/news-releases/q2-td-cowenafs-freight-index-parcel-surcharge-changes-wring-out-additional-revenue-ltl-and-truckload-rates-hold-steady-302111821.html SOURCE AFS Logistics |