News

Taking its cues from trucking market, Norfolk Southern raises some intermodal prices

Photo: Norfolk Southern

In another sign of market strength, Norfolk Southern announced price increases in its intermodal division by up to 15%, effective June 15.

The increases are for non-contract business, the company said in its announcement to shippers in its EMP segment. It is for business with “open expiration dates.” 

The details of the increases are to be provided by the end of this week. Shippers received the notices on Tuesday of this week. 

The intermodal business as a percentage of Norfolk Southern’s total business is relatively small, according to Deutsche Bank analyst Amit Mehrotra. Still, it is another sign of the market conditions Norfolk Southern sees that it could put through some increases of as much as 15% when overall price inflation is running in the 2-3% range.

Mehrotra said that intermomdal price increases are price followers, not leaders, and they tend to follow increases in truck rates. The gap between higher truck rates and an increase in intermodal rates is often as much as six months. “There’s a lag in the time it takes to close, and we’re seeing it close now,” he said of the Norfolk Southern move.

“We believe this increase reflects both the pricing power of rails and the current capacity constraints in the trucking industry as the majority of NSC’s domestic intermodal business is likely truck competitive,” Mehrotra and his team told clients in their morning note. “Further, we believe this is also an effort by NSC to be more selective with its business by emphasizing more profitable, higher-yielding business.”

Norfolk Southern officials could not be immediately reached for comment.
 

Tags
Show More

John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.
Close