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Yahoo
18-07-2025
- Business
- Yahoo
FedEx and UPS cease parcel discounts, ‘weaponize' fuel surcharges: report
Legacy parcel carriers FedEx and UPS have begun to discontinue commercial discounts, previously offered in response to increased market competition, prioritizing instead high-yield shipments and profitability to better meet Wall Street expectations, according to the TD Cowen/AFS Freight Index published this week. Businesses are paying more per package shipped with FedEx (NYSE: FDX) and UPS (NYSE: UPS) as the couriers' ground networks lose volume at the bottom end and replace some of that with express volume as customers trade down in service levels. The shift of cost-conscious shippers to alternative providers with slower, cheaper services is reflected in the ground parcel cost per package reaching a record high of 32% above the index's 2018 baseline during the second quarter. The loss of lightweight volume resulted in a higher average billed weight per package that in turn drove up the cost per package, the report from AFS Logistics and financial services firm TD Cowen said. Parcel volumes for the two delivery powers soared during the pandemic, but began declining in 2023 as e-commerce sales normalized, Amazon expanded and new couriers entered the market. FedEx and UPS engaged in a pricing war with startup delivery companies and retailers like Walmart for about 18 months. Management at both companies has signaled to investors this year that the focus is now on profitable parcel freight. UPS's decision in January to give up half of its business with Amazon over the next two years underscores the interest in boosting profitability. Data analytics and consulting firm LJM Group echoed the index's findings in an investor briefing this week, saying that parcel pricing is more stable today than it was in 2023-24, but is not back to pre-pandemic predictability, according to a readout of the call from Susquehanna Investment Group. It said many clients are making the shift to use the U.S. Parcel Service because of Ground Advantage, a product introduced two years ago as a low-cost option for packages up to 70 pounds with transit times of two to five business days. 'The challenge for smaller and mid-sized shippers is that saving $3 to $5 per package by shifting some of their business to USPS or a regional carrier from FedEx or UPS must be weighed against the loss in savings from FedEx/UPS's volume-driven pricing structure when some of that volume is shifted away. This can effectively trap small and/mid-sized shippers with limited volume in a sole-sourcing parcel strategy with one of the legacy national providers,' Susquehanna equity analyst Bascome Majors wrote. The parcel giants have also been busy tacking on service fees to their base shipping rates, usually matching any surcharge imposed by their rival. Memphis, Tennessee-based FedEx earlier this month notified U.S. customers of peak season surcharges that are higher than those imposed last year. The extra fees begin phasing in on Sept. 29, based on the handling needs or service levels, and run through Jan. 18. FedEx also imposed similar handling, oversize and unauthorized package surcharges on July 14 for international packages. UPS has been the most aggressive of the two in overhauling its rating model and rolling out new surcharges, according to the TD Cowen/AFS Freight Index. The manipulation of surcharges by the integrated network carriers is most notable with fuel. Fuel surcharges, based on opaque formulas pegged to the price of fuel, have long been considered a way for carriers to pad profits beyond simply being a cost-recovery mechanism, but FedEx and UPS have 'weaponized fuel surcharge as a revenue tool,' the authors said. During the past year, domestic ground shippers have experienced a cumulative increase in fuel surcharges of 30% when compared to a constant diesel fuel price level, indicating that the fees are because of carrier actions rather than fuel price fluctuations, according to TD Cowen and AFS data. Express shippers saw a modest 0.6% increase due to carrier adjustments even though the U.S. Gulf Coast jet-fuel index fell 10.3% in the second quarter. 'Low demand and competition from other players have pushed both FedEx and UPS to focus on right-sizing networks to hold onto the volumes they can profitably serve,' said Mingshu Bates, AFS Logistics' chief analytics officer and president of parcel, in the report. FedEx has recently accelerated the consolidation of its separate Ground and Express networks. UPS is also closing terminals and moving activity into larger, automated sortation centers to reduce overhead and improve efficiency. The TD Cowen/AFS Ground Parcel Freight Index is expected to reach 29.2% in the third quarter, representing a 7% year-over-year increase and a 2.2% decrease from the second quarter. AFS Logistics provides managed transportation, freight audit and cost management services to freight buyers. It has visibility into more than $39 billion in annual freight spending. Click here for more FreightWaves/American Shipper stories by Eric Kulisch. Write to Eric Kulisch at ekulisch@ RELATED STORIES: LTL pricing index to hit record high in Q3 FedEx, UPS lose market share to big retailers, small couriers US parcel market to grow 36% by 2039, Pitney Bowes says The post FedEx and UPS cease parcel discounts, 'weaponize' fuel surcharges: report appeared first on FreightWaves.
Yahoo
24-04-2025
- Business
- Yahoo
Tariffs Take Their Toll on Trucking
Trucking companies are beginning to bear the burden of President Donald Trump's tariffs on U.S. trade partners, and are cutting headcount and seeing decreased volumes as a result. Volvo Group North America could be laying off as many as 980 employees across three U.S. manufacturing plants over the next few months. More from Sourcing Journal IMF: Trump's Tariffs Have the Power to 'Significantly Slow Global Growth' Bangladesh Apparel Sector Says High Freight Costs Are a Policy Problem China Warns Other Nations That 'Appeasement Cannot Bring Peace' in Trade War With US 'Heavy-duty truck orders continue to be negatively affected by market uncertainty about freight rates and demand, possible regulatory changes and the impact of tariffs,' said a spokesperson at Volvo Group North America, in a statement. 'We regret having to take this action, but we need to align production with reduced demand for our vehicles.' A range of 430 to 530 employees will be laid off at the Volvo Trucks New River Valley plant in Dublin, Va. Their last day will be June 27, according to the spokesperson. Another 250 to 350 people at the company's Mack Trucks Lehigh Valley center in Macungie, Pa. will also see their employment cut. In Hagerstown, Md., 50 to 100 employees at the company's Powertrain facility will be affected. Volvo Group North America, which represents 29 percent of total 2024 sales at Volvo Group, employs 19,600 people and operates 16 manufacturing and 'remanufacturing' facilities across the U.S., Canada and Mexico. The uncertainty created by the tariffs is expected to exacerbate demand concerns that have largely permeated across trucking since 2022, when the freight recession started and the freight-moving capacity well outpaced demand levels. The lack of demand has further applied downward pressure on freight rates—a foreboding sign for trucking companies. In Q2 2025, the truckload rate-per-mile index is projected to show a slight quarter-over-quarter decline to 5.5 percent, according to April's TD Cowen/AFS Freight Index—the ninth straight quarter with rates between just 4.3 percent and 5.9 percent above a 2018 baseline. 'A sustained shift toward shorter-haul shipments, defined as those of 500 miles or less, drove the total cost per shipment down to 5 percent above pre-pandemic levels—the lowest point in over three years, and indicative of a broader trend of more regional distribution and decentralized inventory positioning,' according to the index. Numerous trucking companies have ceased operations over the past month as the market tightens, including Florida-based Davis Express, Illinois-based LTI Trucking Services and Michigan's Equity Transportation Co. Two other businesses, Best Choice Trucking in Massachusetts and C & C Freight Network out of Georgia, filed for Chapter 11 bankruptcy. The trucking industry was largely bullish on the prospects of a second Trump administration, namely based on the president's platform for increased domestic manufacturing and reshoring. Trump's tariffs are designed to incentivize U.S. and foreign businesses alike to bring more production back to the U.S., Canada and Mexico. A manufacturing boom in North America would in theory mean more volumes moved domestically and across borders. With more demand filling up trucking capacity, freight rates on the road would improve, benefiting trucking firms. However, domestic manufacturing contracted in March after two months of expansion, according to the Institute for Supply Management (ISM) Manufacturing Business Survey. Price growth on inputs accelerated due to the tariffs, causing new order placement backlogs and supplier delivery slowdowns. Additionally, the sheer steepness of the tariffs have created some barriers for trucking, especially the 25-percent duties levied on the U.S. neighbors for products not already compliant with the U.S.-Mexico-Canada Agreement (USMCA). North of the border, the Canadian Trucking Alliance says 70 percent of a carriers have seen loads to the U.S. either cancelled or paused. This includes commodities like lumber, oil, fertilizers, farming equipment, tires and food products. As many as 60 percent of Canadian trucking carriers said that a prolonged trade war could put their business operations at serious risk. 'Once capacity is drained from the cross-border sector, it will be dumped into the Canadian market, creating unsustainable business conditions and a nuclear winter for Canada-U.S. freight movement,' said CTA president and CEO Stephen Laskowski in a statement. Alternatively, counter-tariffs haven't has as much of an impact on Canadian imports from the U.S., as 70 percent of carriers report no impact on demand for northbound freight. The 145-percent duties slapped on China have been more extreme than even many industry experts previously imagined. As a result, the mass cancellation or postponement of orders out of China has resulted in plummeting freight numbers over the Pacific Ocean. With both the Ports of Los Angeles and Long Beach serving as major hubs for freight, truckers are anticipating fewer pickups of goods and ensuing deliveries. Overall, February freight appointments from ports, warehouses and distribution centers jumped 44 percent from January, according to dock appointment scheduling platform DataDocks. But the jump is presumably a byproduct of the pulling forward of goods ahead of the anticipated tariffs, as month-over-month numbers in March declined 15 percent. April's totals plummeted another 41 percent in an another indicator that trucking movement has largely cooled down. The sharpest declines in freight volume bookings for April, according to DataDocks, are in the Northwest (61 percent) and West (52 percent) regions—yet another gauge of the slowdowns on the West Coast. One major logistics and trucking firm, J.B. Hunt, was already seeing volume and revenue softness ahead of the West Coast's 'drying up' of cargo, illustrating the rough sledding many carriers were already facing ahead of the pause in international bookings. The company's truckload segment saw a tepid 2 percent increase in load volume, with the unit's revenue per load falling 6 percent from the year prior. 'The truckload market loosened as the quarter progressed,' said Spencer Frazier, executive vice president of sales and marketing at J.B. Hunt, in an earnings call earlier this month. 'This suggests truckload capacity continues to exceed demand.' 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Yahoo
22-04-2025
- Business
- Yahoo
Tariff concerns weigh on freight recovery: report
This story was originally published on Trucking Dive. To receive daily news and insights, subscribe to our free daily Trucking Dive newsletter. Truckload and less-than-truckload pricing showed some improvement in Q1, but tariff-heavy U.S. trade policies could prolong soft demand, according to the TD Cowen/AFS Freight Index released April 8. "Tariffs have become the topic du jour in boardrooms and beyond, and combining those policy changes with a cloudy macroeconomic picture is a recipe for the uncertainty and caution that characterize current market sentiment," Andy Dyer, CEO of AFS Logistics, said in a news release. Amid back-and-forth in tariff applications from the Trump administration, shippers have pulled inventory forward to get ahead of potential disruptions. The frontloading helped truckload rates to come in higher than expected at 5.9% above the January 2018 baseline, the report said. There was also a shift toward shorter-haul shipments, driving the total cost per shipment down to 5% above pre-pandemic levels, hitting the lowest point over three years. The downward pressure is 'indicative of a broader trend of more regional distribution and decentralized inventory positioning,' according to the report. In Q2 2025, the rate per mile index is projected to decline to 5.5% from the previous quarter, marking the ninth straight quarter with rates between 4.3% and 5.9% above the 2018 baseline, per the report. To get ahead of tariffs, retailers continue to bring as much merchandise into the country as possible, Jonathan Gold, VP of supply chain and customs policy at the NRF, said in a March press release. The U.S.' tariffs on Canada and Mexico could impact the flow of truck and rail-driven cargo between those countries. Shippers have also pulled forward cargo imports such as machinery, lumber, metals and oversized flatbed freight to mitigate tariff uncertainty, DAT Principal Analyst Dean Croke told Trucking Dive in an email in March. The LTL market, on the other hand, takes longer to feel the impacts from macroeconomic forces and changing trade policy compared to the truckload market, according to Aaron LaGanke, VP of Freight Services at AFS. At this time, LTL carriers are effectively navigating a low-demand environment and are focusing on profitable lanes, contractual relationships and reliable freight, rather than chasing volume with pricing concessions, LaGanke said in the release. 'After 26 months of contraction, the purchasing managers index finally reversed course with two months of growth early in Q1 2025, but March data shows it's back to contraction, which underscores some of the headwinds facing the freight market,' LaGanke said. The net fuel surcharge per LTL shipment increased 4%, high enough to overcome decreased haul lengths and sustained low weight. For Q2, the freight index forecasts the LTL rate per pound index to be at 63.4%, a bit of a drop quarter over quarter, but a 0.7% year-over-year increase. That would result in the sixth consecutive quarter with a positive YoY trend. Recommended Reading Elevated LTL rates begin to ease, index says Sign in to access your portfolio
Associated Press
08-04-2025
- Business
- Associated Press
Tariffs and economic uncertainty cast shadow over freight markets: Q2 TD Cowen/AFS Freight Index
Shifting trade policies, low consumer confidence expected to prolong low demand and delay freight market recovery ATLANTA, April 8, 2025 /PRNewswire/ -- AFS Logistics and TD Cowen announce the second quarter (Q2) 2025 release of the TD Cowen/AFS Freight Index, a snapshot with predictive pricing for truckload, less-than-truckload (LTL) and parcel transportation markets. The latest release highlights the effects of an uncertain economic outlook and rapidly evolving trade policies weighing against a freight market recovery. Data shows truckload pricing staying at depressed levels after a small uptick in Q1, LTL pricing discipline working to keep rates flat and parcel carriers unleashing additional pricing changes to squeeze more revenue from limited volumes. 'Tariffs have become the topic du jour in boardrooms and beyond, and combining those policy changes with a cloudy macroeconomic picture is a recipe for the uncertainty and caution that characterize current market sentiment,' says Andy Dyer, CEO, AFS Logistics. 'These conditions do not indicate a shift away from the malaise of soft demand that has shaped domestic transportation markets for quite some time.' Truckload: Nine straight quarters with rates at the bottom In Q1 2025, the truckload rate per mile index came in somewhat higher than expected, at 5.9% above the January 2018 baseline. This uptick can be attributed to shippers pulling inventory forward to get ahead of the latest tariffs, along with the impact of wildfires, natural disasters and continued capacity correction. But a sustained shift toward shorter-haul shipments, defined as those of 500 miles or less, drove the total cost per shipment down to 5% above pre-pandemic levels — the lowest point in over three years, and indicative of a broader trend of more regional distribution and decentralized inventory positioning. In Q2 2025, the rate per mile index is projected to show a slight quarter-over-quarter (QoQ) decline to 5.5% — the ninth straight quarter with rates between 4.3% and 5.9% above the 2018 baseline. LTL: Carriers judiciously managing low-demand environment to keep rates elevated Despite economic headwinds and cautious market sentiment, LTL pricing continues to show strength. In Q1 2025, general rate increases (GRIs) took effect and the net fuel surcharge per shipment increased 4%, exerting enough upward pressure to overcome decreased length of haul and sustained low weight to drive a 1.5% QoQ and 0.5% year-over-year (YoY) increase in cost per shipment. For Q2 2025, the rate per pound index is forecast at 63.4%, a slight QoQ drop but a 0.7% YoY increase — the sixth consecutive quarter with a positive YoY trend. 'After 26 months of contraction, the purchasing managers index finally reversed course with two months of growth early in Q1 2025, but March data shows it's back to contraction, which underscores some of the headwinds facing the freight market,' says Aaron LaGanke, Vice President, Freight Services, AFS. 'Truckload typically feels the impact of macroeconomic forces and trade policy first, then LTL has more of a delayed reaction. For now, LTL carriers are effectively navigating a low-demand environment with a focus on profitable lanes, contractual relationships and reliable freight, rather than chasing volume with pricing concessions.' Parcel: Carriers attempt to regain pricing advantage The era of parcel price increases announced on a predictable, annual cadence with plenty of advance notice for shippers is over. Over the past 18 months, FedEx and UPS have pursued a different strategy as they fight for revenue in a low demand environment, with more frequent, subtle pricing changes that take effect more quickly. Through the first three months of 2025, UPS has already announced myriad changes, including new ZIP code-zone alignments, new fees on print and paper invoices, fees for check and wire payment, an increase to the late payment fee and a new payment processing fee. Both carriers have also continued to make fuel surcharge changes, the net result of which is the UPS ground fuel surcharge increasing 15% and the FedEx equivalent rising 12% from Q1 2024 to Q1 2025 — even as the price of diesel fuel fell 8.4% over the same period. 'These latest changes introduce even more complexity for shippers to digest and negotiate. If they overlook any one of these subtle updates, they can find themselves subject to punitive provisions like a blanket payment processing fee that's in effect a 2% price hike,' says Mingshu Bates, Chief Analytics Officer and President of Parcel, AFS. 'If you look at the state of the market, these changes fit the carriers' stated aims of prioritizing network efficiency and revenue quality. Competition from the Postal Service and regional carriers has FedEx and UPS looking to defend their slice of a soft market while trying to shift away from the discount-heavy dynamics of the past year and a half.' Despite carriers' emphasis on pricing discipline, the average discount in ground parcel increased 1.9% QoQ in Q1 2025. Yet ground parcel pricing remained exceptionally strong, as the cost per package rose 4% QoQ to a record-high quarterly average in Q1 2025, driven by rate increases, surcharge adjustments and higher billed weight. The ground parcel rate per package index is expected to decrease from 31.3% in Q1 to 29.5% in Q2 2025, which still represents a 2.6% increase YoY. Express parcel pricing grew in line with seasonal trends in Q1 2025, with GRIs and fuel surcharge increases powering a 5.2% QoQ increase in cost per package. But volume growth remains a challenge in the domestic express parcel market. This is in part driven by carriers' own success in optimizing ground networks, enabling shippers to shift volume to less expensive ground service for similar performance, but is also exacerbated by competition from an increasingly diverse carrier landscape, an example of which is USPS recently launching priority next-day service in 54 markets. Looking ahead to Q2, the rate per package index is expected to hit 3.1% in Q2 2025, a marginal 0.3% QoQ decrease and 1.4% YoY decline. About the TD Cowen/AFS Freight Index The TD Cowen/AFS Freight Index launched in October 2021, offering a unique perspective on the transportation market through its dataset and forward-looking view. Expected rate levels are derived from visibility to over $39 billion of annual transportation spend across all modes and includes actual net charges that factor in accessorials such as fuel surcharges. Past performance and machine learning produce predictions for the remainder of the quarter, set against a baseline of 2018 rates for each mode. About AFS Logistics AFS is a group of shipping strategists that helps more than 1,800 companies across 35 countries better understand their freight costs. The company has over $11 billion in transportation spend under management, and uses that data along with decades of truckload, LTL and parcel experience to help advise, optimize and manage client shipping programs. AFS provides support throughout the process of buying, planning, executing and settling transportation services, constantly assessing performance to ensure shippers only pay what they should and get the service and operational outcomes they deserve. The company was founded in 1982 and employs more than 380 teammates across the U.S. and Canada. AFS is regularly part of the Inc. 5000 list of fastest growing companies. To learn more, visit
