Thursday, July 16, 2009

Dahlman Rose rail shipper survey evaluates pricing

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Railroad shippers anticipate an average base rate increase of 3.3% during the next six-to-12 months, according to a new survey conducted by New York-based investment bank Dahlman Rose & Co.

The  2009 2Q Rail Shipper Survey finds rail companies expecting to continue to face pricing pressure in the upcoming months. The rate is below past quarterly survey results-- a 3.6% expected increase in the first quarter of 2009 and a 3.5% increase in the fourth quarter of 2008.

Survey respondents were small, mid-to-major U.S. companies that use rail to transport a range of materials, including metals, petroleum, and chemicals, as well as building, consumer, and paper products, Dahlman Rose said.


“Although the near-term outlook remains bleak for railroads, shippers expect their businesses to pick up and grow 4% on average across multiple industriesin the next year,” Dahlman Rose said. “The results show agricultural products, metals, and petroleum products are leading the way for best anticipated growth; chemicals, building products, and consumer products, on the other hand, expect lower growth. The results bode well for the rail space and the broader market in the long term.”

"It is clear from our proprietary survey that pricing pressure exists in the marketplace," said Jason H. Seidl, Dahlman Rose director of Rail, Trucking and Air Freight research and Railway Age Contributing Editor (photo, left). "However, if shipper optimism for business growth turns out to be well-founded, this could relieve the pressure."

The survey also indicates that a great majority of shippers do not plan to file any rate action against a railroad during the next 12 months. The results, compared to last quarter's, suggest that shippers believe that current pricing practices are not out of line.

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