CSX Corp. expects prices for its freight services to rise by up to six percent in 2007 with further increases to follow in 2008, the company’s top executive said.
“We have had price increases this year of five percent to six percent and we expect to see the same in 2007,” Chief Executive Officer Michael Ward said.
He added that it was too early to tell how high the company’s price rises will be in 2008.
Ward spoke to Reuters after CSX reported third-quarter results that came in above market expectations, with freight volumes up almost two percent on the previous year.
Like the other US railroads, CSX has been working on improving network speed and efficiency to catch up with demand, which has been boosted by rising US imports and coal orders from utilities switching from more expensive natural gas.
As that demand has risen, the railroads have been able to raise prices after more than two decades of rate stagnation.
Ward said 20% of CSX’s coal contracts are due for renewal in the fourth quarter. He said the railroad is pushing for shorter contracts to allow for more flexibility on price increases.
“We are willing to go for longer contracts if utilities want that, but the price increases will be higher,” as a result, Ward said.
He said that the company’s improvements in network speed and performance should lead to five to seven percent growth in intermodal services at CSX in 2007, compared with four percent growth in the third quarter.
The consumer goods arriving in the United States from developing nations like China come in containers and intermodal services are the fastest growing form of US rail transport.
Ward said that despite a slowing of some parts of the US economy - CSX saw automotive and construction related shipments fall in the the third quarter - the company should see solid growth in most of its business segments.
“We are less linked to the economy than we used to be,” he said. (Reuters)