(The following story by David Hannon appeared at Purchasing.com on February 14.)
While the trucking industry struggles with higher fuel costs and decreased pricing power, railroads are seemingly immune from the economic downturn when it comes to pricing.
In the fourth quarter of 2007, railroads including Norfolk Southern, Union Pacific and CSX all cited stronger pricing for increased revenues in the quarter, despite lower volumes and dramatically increased fuel costs. Michael Ward, CEO of CSX , said the firm planned price increases of 5–6% for 2008 and expected freight volumes to be flat to slightly up. Wick Moorman, CEO of Norfolk Southern, forecast 4% increase in rates on average.
In a recent research note, Bear Stearns analysts said, “The railroads should continue to see better than historical pricing going forward, albeit decelerated from the peak in recent years. We also expect the rails to take share from highways over the next decade driven by Asian manufacturing, better fuel efficiency and increasing highway congestion.”