Top 5 factors affecting containers shipping rates | Shipping Containers For Rent California

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 from centuries confronting 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, which means a country’s overall economic position depends hugely on its freight that 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 in freight companies is fluctuating containers shipping rate from time to time which disrupts the whole economy including shippers, manufacturers, traders, 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 but there are external circumstances as well which is beyond the sway of shippers.

Let’s have a short look at 5 most dominating factors that affect containers shipping rates:

1. 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 downmarket performance. This also bound the traders to increase the prices of their products in order to recuperate from this extra cost.

E.g:- If the freight rate is USD1000 for 20ft containers & USD2000 for 40ft shipping containers for sale, then with the effect of GRI it will be payable USD1200 for 20ft containers & USD2400 for 40ft shipping container for sale.

GRI is also regulated as a freight rate in countries like U.S.A where it is obligatory to inform 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.

2. EMERGENCY BUNKERS SURCHARGE: The meaning of ‘bunker’ has changed over the year, once it was a term to describe steam power but now used for fuels. Fuel cost is one of the most volatile aspects in the freight department, can change overnight affecting traders at large. 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 cost ocean carriers try every way out to mitigate these price swings by implementing Bunker Adjustment Factor (BAF).

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

3. HIGH SEASON: Every business has a peak season or high season, also known as 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 cargo containers for sale/transportation at a higher rate for cargo theft.

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

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

4. 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 dollar enhances the buying behavior of US consumer, goods are available to them at a cheaper rate. American export may tend to rise, imports may declines. But this overall fluctuate global freight rate as other countries find no other way than adjusting their price accordance with US dollar rates.

5. 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. Expert says that trucking shortage has risen up after the final rule of ELD (Electronic Logging Device) mandate. It can be convenient to understand from demand and supply rule, as when supply fall, 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 and remain abandoned from this problem by planning their shipment in advance, finding an alternative route for cargoes, or having a backup plan, etc.