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6 Factors Influencing Ocean Freight Rates

Apr 23, 2018

If you’re importing or exporting you are most likely relying on ocean freight to move goods. Understanding how these rates are determined is a good idea since they impact the final cost of your products. To help you gain clarity, here are 6 factors influencing ocean freight rates that you should know. 

Ocean Freight Rates.jpgDestination

The point of origin and the final destination of your freight are important factors to consider. The less common the destination the higher the cost less carriers travel there, less frequently so there’s less available capacity. The more popular the destination, the more likely you’ll encounter capacity issues due to high demand for available space. 

Bunker Fluctuations 

Fuel costs impact every form of freight shipping. Bunker fuel is no exception. It is closely tied to the cost of oil and its cost tends to rise and fall with that of oil. Because of this fact, it is common to see a fuel surcharge applied to ocean freight rates.

Seasons

There are two main peak seasons during the shipping year. One is the holiday retail peak season that typically lasts from mid-August through mid-October. The second peak season is during Chinese New Year in January and February. During these times the demand for cargo space is high and the supply is low. This drives prices up while container capacity may be scarce.

Also, rates for shipments requiring controlled temperature environments will be influenced by weather during various times of the year. Plus, inclement weather may cause smaller ships to be docked. This results in decreased supply during a time when demand is typically high and creates a spike in shipping rates. 

Service Charges and Fees 

When using ocean freight, terminal fees are charged at the ports of departure and arrival. There are various other fees charged by shipping lines and port authorities as well including those for hazardous materials, if applicable, and security.

Currency 

The U.S. dollar is the standard for international transactions. However, in an international market, currency exchange rate fluctuations need to be factored into rate calculations. This means that the daily change in money markets can influence ocean freight rates and must be considered. 

Container Capacity

Most ocean shipments are calculated based on weight or measure, whichever is greater. This means that it is most advantageous to completely fill the container carrying your freight. Unless you are shipping Less-than-Container-Load (LCL), you will be responsible for paying the entire cost charged for the container, even if it isn’t completely full. 

These are the 6 main factors influencing ocean freight rates. Now that you understand them, you’ll be able to better plan your international shipping to minimize costs. Your freight shipping partner is familiar with all these factors as well as all the different charges and fees involved in ocean freight. Need help planning your next international shipment? American Group can help.

American Group is a 3PL with decades of experience guiding businesses through the selection, preparation, and shipping of their freight. Contact us for assistance with your next shipment by phone at 866-553-6608 or by email at Info@ShipAG.com. We’re here to make Shipping.Simplified®.

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