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Railroad shippers anticipate an average base rate increase of 4.7% over the next 6-12 months, a “substantial” 90 basis point increase from the 1Q18 survey. This marks the fifth consecutive quarterly increase in shipper expectations, in addition to the second-largest sequential increase. “While the economy remains solid, the rapid increases in truck pricing and continued issues in procuring truck capacity are key reasons that the railroads are well-positioned to continue raising rates.”
Among Class I’s, BNSF continued to be ranked highest in service quality among survey respondents, with a 66% positive rating, followed by Canadian Pacific at 59%. CSX and CN were rated the worst, though CSX’s 39% positive ranking was an improvement over its “dismal” 33% positive ranking in the 1Q18 survey.
How do the railroads rate against the competition? “With trucking capacity perhaps as tight as ever, only 12% of survey participants said that truck is cheaper than rail, down from 14% last quarter,” notes Seidl. However, fewer people said that rail is 15% to 25% cheaper and 25%+ cheaper, whereas more people said that rail is only up to 5% cheaper.
Trump Administration tariffs? “The overwhelming majority of our survey respondents— 82%—haven’t taken any steps as a result of the new tariffs,” says Seidl. “That being said, 10% of respondents have moved up shipments, 2% have moved back shipments, and 6% have canceled shipments due to the new tariffs.”
The 4.7% price increase expectation “is well above the all-important 2% long term rail-cost inflation rate,” notes Seidl. “This, along with the railroads’ slow but steady progression in improving service matrices, should enable the Class I carriers to post strong earnings results in the second half of this year.”
The post Shipper survey “positive” for railroads: Cowen appeared first on Railway Age.
This article first appeared on www.railwayage.com
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