What Influences Sea Freight Rates?
There are many factors that can affect how much a shipper will have to pay for sea freight services. Rates to ship by sea will change and it can be tricky for a shipper to plan ahead to budget for their future shipments. However, knowing what influences sea freight rates can help shippers to prepare and estimate the costs.
The cost of fuel fluctuates all the time. When fuel prices rise, shipping rates will also rise as the additional expense will be passed on to the shipper. On the other hand, when fuel prices fall, so can shipping rates. Often, logistics companies will try to buy in bulk when fuel prices are low, so they can avoid high prices and maintain a steady cost for the shipper.
Certain seasons will mean there is higher demand for shipping. This can result in a Peak Season Surcharge (PSS) being added to the shipping costs. Peak seasons can see congestion and delays at ports, so the fees are implemented to help combat this. Often the peak season will run from August to October, as companies prepare for the Black Friday and Christmas season.
Certain geopolitical events can cause disruption to shipping, which can affect the shipping rates. We have recently seen how the war in Ukraine, the pandemic, and lockdowns in China have all had a knock-on effect to shipping and shipping rates. This is because events like these cause shortages and unpredictability, which can see prices rise when supply cannot match the demand.
Currency exchange rates
Sea freight is international, so there will often be different currencies involved in one transaction. The US dollar is commonly used to denote the value of fuel, but for other shipping costs such as port charges, the local currency will be used. So, the shipping cost that the shipper has to pay will vary depending on the current exchange rate for the local currencies that are involved.
The route that the shipment will take will have an impact on the shipping cost. Some routes will be busier than others. The busier routes will often hold a higher shipping rate due to the high demand and competition to use the route. The busiest shipping lane in the world is the Dover Strait, which sees 500-600 vessels every day. The Asia to USA route which goes through the Panama Canal is another busy route that can see higher rates.
There are various types and sizes of container that are used for shipments. The larger containers will often cost more to ship than smaller containers. The shipper should look for the right size container for their shipment to find the best cost. Sometimes it’s possible to combine shipments from various shippers into one container and then split the cost. This can be helpful if the shipment isn’t big enough to fill a container, as it can save the shipper money.
Where your shipment is going will affect the shipping rate. Every country will have different handling fees for the labour and equipment that will be used to process your shipment through the port. Each container has handling costs for both the origin terminal and also the destination terminal.
The distance travelled will also affect the shipping rates. Typically, the further a shipment has to travel, the higher the cost will be.
Fines and fees
Sometimes extra fees or fines will need to be paid by the shopper. Congestion at ports can cause delays, which can incur extra costs. These costs will have to be covered by the shipper in their shipping rate. The shipper may also have to pay extra fees if the shipment weighs more than is noted on the paperwork, or if any documents are missing or incorrect.
PBS International is an experienced freight forwarder, offering a complete range of international freight forwarding and logistics to suit your budget and timeframe. Contact us to speak to our team about your requirements or request an international shipping quote today.