What are the five factors that affect container shipping rates?

What are the five factors that affect container shipping rates?
22 Nov, 2021

Ocean freight is the major contributor to the world’s trade. With millions of companies importing and exporting merchandise in shipping containers to and from every nook and corner of the world, it is imperative for us to know the factors that impact container shipping rates.

Due to the world’s shipping’s close association with the economy, even the slightest changes in the markets can have a deeper impact on the demand and supply ratio, thus affecting the rates of the shipping containers. Generally, shipping rates are dependent on volume, route, carrier, and port charges. However, there are some external factors that greatly affect container shipping rates and shippers have absolutely no control over that. Let’s delve into some of these external factors to understand the ocean freight services in India and abroad better:

1. General Rate Increase (GRI): The General Rate Increase abbreviated as GRI is basically the adjustment of ocean freight prices by shipping lines. The purpose of GRI is to aid carriers in recovering from low market movements. This is a part of the seasonal cycle and is implemented once in a relatively stable year. However, there have been times when GRI was applied several times in a year. This can not only affect the container rate but also the entire international sea freight cargo services realm.

2. High seasons of shipping: The shipping industry also has its high season just like all other industries when the demand for ocean freight services in India and the rest of the world skyrockets. The peak season of international sea freight cargo services is usually from July to November/December. As the demand is high, therefore, the shipping lines raise freight rates right at the start of the peak season. Sometimes, there is a surcharge known as a peak season surcharge that is additionally applied to the freight rates to cater to the surge in demand. Besides the worldwide peak season, there are times when the supply chains and the ocean freight rates are impacted in a big way. This happens during the Chinese New Year (January/February) and National Day Golden Week (first week of October).

3. Emergency Bunker Surcharge (EBS): Among many surcharges at the shipping lines’ disposal, another commonly implemented surcharge is the emergency bunker surcharge (EBS). EBS is informed at the last minute because it is implemented as an emergency measure to combat the unanticipated increase in fuel costs.

4. Trucking shortage: The shortage of truckers has now become a very common logistical problem for shippers. Talking about the situation in the US, the trucking shortage has caused supply chains to move into near-paralysis. As a natural market reaction, whenever there is a trucking shortage, the demand for ocean freight increases resulting in an increase in container rates.

5. Extra ocean freight costs: There are costs that can’t be anticipated like demurrage, detention, or customs inspections fees. Although these costs are never included in container shipping rates yet they can greatly affect the overall shipping costs.

Even though most of these situations and surcharges are beyond the control of the shippers, there are certain ways to mitigate the chances of incurring the extra ocean freight costs. Planning the shipments well in advance and having the documentation right can help the shippers to a great extent in avoiding these extra costs. 

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