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.
