Top 5 Factors Affecting Containers Shipping Rates | LOTUS Containers

Scrutinizing down the history, one can find the shipping industry has traveled all the way long. For centuries it has confronted various ups and downs, yet contributes 90% of the total world trade. There is no dubiety in saying that the freight industry is key to sustaining the modern economy. It means a country’s overall economic position depends hugely on its freight. And even a slight change in the market can lead to great agitation amongst the countries. Millions of manufacturers and producers around the world hold credibility in making this industry vast enough to practice trade with much ease and affordability. 

One of the chief concerns of a shipping container company is fluctuating container shipping rates/freight charges from time to time. The fluctuation disrupts the whole economy including shippers, manufacturers, shipping container suppliers, and even common people.

Fluctuating container shipping rates have been one of the main concerns of the logistic trade sector. As per economists and experts, there are various factors that influence the rates depending on volume, ports, carrier charges or route demand, supply, market condition. There are external circumstances as well which are beyond the hands of shippers.

Let’s have a short look at the five most dominating factors that affect containers shipping rates

General Rate Increase

General Rate Increase commonly known as GRI refers to the amount by which oceanic freight increases its base rates in some of the trade routes as part of adjustment applied for a specific time. A GRI can add unexpected operational costs to both importers and exporters but many of the times it is applied to help carriers recuperate from the down-market performance. This also bound the traders to increase the prices of their products in order to recuperate from this extra cost.

As an example, we see here that if the freight rate is USD 1000 for 20ft containers & USD 2000 for 40ft shipping containers for sale, then with the effect of GRI, the payable amount is USD 1200 for 20ft containers & USD 2400 for 40ft shipping containers for sale.

If one wants to buy shipping containers in Kentucky California and other such places of the USA, and want to ship the cargo to distant places. They will have to get in-depth knowledge of GRI freight rates. As it is obligatory to inform the Federal Maritime Commission 30 days prior to its execution but the same is not applicable for other countries. Hence, BCO gets affected greatly as they have to end up paying extra even after a confirmed booking of cargo.

Emergency Bunkers Surcharge

The meaning of ‘bunker’ has changed over the last years, once it was a term to describe steam power but is now used for fuels. Fuel cost is one of the most volatile aspects in the freight department and can change overnight affecting traders at large. The International Maritime Organization (IMO) keeps changing the fuel guidelines in order to put a cap on emissions like sulfur cap emission that changes the price of fuel overnight. 

Other than this, Emergency Bunkers Surcharge is associated with the existing or anticipation of rising fuel costs implemented by carriers. Since fuel is the backbone of the shipping industry, a small fluctuation in oil and fuel prices leads to a change in overall operating costs. To cover these costs ocean carriers try every way out to mitigate these price swings by implementing the Bunker Adjustment Factor (BAF).

But many times the anticipated crude oil price exceeds the actual market price than in order to protect them from this immediate increase in prices, carriers impose a last-minute fee known as Bunkers Emergency Surcharge.

High Season

Every business has a peak season or high season, also known as the holiday season when demand is high and revenue generation reaches the pinnacle. Likewise, shipping companies have their peak season that starts from July and lasts till November or December. This is the period when there is a dramatic increase in demand which influences various factors like shortage of trucking capacities, global supply chain, vessel capacities, goods prices, etc. During this time, importers and traders either have had their pre-bookings secured and their cargoes prepared to transport merchandise. It is often found that freight containers for sale/transportation at a higher rate for cargo theft.

China is the world’s largest exporter and plays a major role in spiking freight rates especially during the weeks including Chinese New Year (January/February) and National Golden week (October’s first week), which is marked by a large sales and revenue generation period.

Mostly freight and container prices tend to hike during the high season in response to increasing demand because like other sector logistics the sector also avails the full benefit of it.

Rolling Currency

One cannot ignore considering currency as an important aspect that affects pricing rates while talking about the trade market. The common denomination used as a standard currency for international transactions is the US dollar. Depreciation of the dollar enhances the buying behavior of US consumers, goods are available to them at a cheaper rate. American exports may tend to rise, imports may decline. But this overall fluctuates the global container shipping rates as other countries find no other way than to adjust their price in accordance with US dollar rates.

Shortage in Trucking Capacity

American Trucking Association reported in October 2008 that Ground Transportation is moving more goods than ever, where truck hiring notices an overall growth of 9.9% year over year. With an increase in demand of consumers and traders, the number of trucks available for transportation is not sufficient to meet the demand of the growing economy. Experts say that the trucking shortage has risen up after the final rule of ELD (Electronic Logging Device) mandate. It can be convenient to understand from the demand and supply rule, as when supply falls, price tends to rise, similarly when there is a shortage in trucking capacity, demands gravitate to increase hence sea freight increases dramatically. As a result, shippers might end up paying a bulky amount to secure a trucker for them. However, this is beyond the sway of shippers but one can avoid the problem by planning their shipment in advance, finding an alternative route for cargoes, or having a backup plan, etc.

Thus, we see here that the above-mentioned factors affect the container shipping rates. But managing it properly the shippers can mitigate the hiked up rates and thrive in the shipping container industry. So, if you are the one who is thinking of buying shipping containers or getting a used container for sale, keep the fluctuating container shipping rates in mind so that when you buy the shipping container, you get the best deal.