DHL Express, the international air express unit of German conglomerate Deutsche Post DHL (NASDAQ: DPSGY), announced Friday that it will increase rates on all U.S. shipments by 7.9% effective Jan. 1.
The increase applies to all international shipments to and from the US billed to US accounts, the entity said.
DHL Express does not operate in the domestic US market, with the exception of a limited number of domestic products available at retail outlets. DHL Express ceased US domestic operations in January 2009. Since then, the company has used the US market solely to support international air travel.
The increase beats the 6.9% overall rate increase (GRI) reported by FedEx Corp. in recent months. (NYSE: FDX) and UPS Inc. (NYSE: UPS) were announced.
DHL Express’ move won’t be nearly as significant as FedEx and UPS’s moves, as DHL Express has a relatively small footprint in the US.
The GRI increases are considered symbolic because they apply to published rates and virtually all shipper-carrier relationships are contractual. However, contract rate increases and discounts negotiated from those increases are generally tied to actions that parcel service providers take with their GRIs. As a result, GRIs are considered an important barometer of the rates and discounts shippers can expect to find in their contracts.
Satish Jindel, founder and president of consulting firm ShipMatrix Inc., said the US parcel market is currently facing stagnant demand. At the same time, grid operators have committed to increasing capacity, which could put their grids at risk of overcapacity.
The current situation will lead to an increase in discounts for larger parcel senders, Jindel said. Small to medium-sized shippers, who generally don’t have the volume leverage of their larger competitors, need to be careful to avoid also paying higher rates.