Changes in shipping rates can be a real issue for businesses that make their money selling things internationally. Despite the fact that this might not be the case for trading companies like Traze (www.traze.com), shipping rates changing in either direction can be complicated and difficult for many traders online.
So, why do the rates change so much? Well, let’s talk about that here, and develop a better understanding.
Supply and Demand
Supply and demand is perhaps the most obvious reason why shipping rates would change at all, but it’s still worth pointing out. While there are certain commodities that retain their demand at a fairly steady rate like gold, there are others that experience peaks and troughs in this regard.
For instance, say there was a rush on turmeric, and people suddenly wanted to buy a lot of it. Since the main place where turmeric is grown and processed is India, there would be a sudden increase in demand for Indian exports. Because Indian shipping companies can only export so much in a given time, they can raise the price of their services, effectively reducing supply, so that they’re only getting what business they can manage.
Geopolitical Events
Typically, long-established trade routes between any two locations already exist, and have existed for a long time. This means that if some major geopolitical event arises along that route, then the cost to navigate and ship through that event will increase.
This can be seen throughout history but has largely been seen with the war in Ukraine. Because Ukraine holds such a central location in Eurasia, the cost of shipping things overland throughout the continent has increased. The reason for this is simple, couriers may have to take a route that is not much more dangerous, or they may have to alter their route and travel further, increasing time and fuel costs.
Technological Advancements
Technological advancements in the shipping industry have impacted prices in two ways: increased tech being carried, and increased volatility.
The increase in tech being carried along with any given shipment is because, at any time, the sender or recipient may want to check on the location of their shipment. As such, location tracking software can be included within a load, leading to higher prices in fuel consumption, tech maintenance, and load insurance.
Before modern technological advancements, shipping companies would often have representatives at docks and truck stops advertising their prices to ship certain loads. Nowadays, these representatives have been replaced by digital marketplaces, meaning that decisions can be made much more quickly and, in turn, prices can change much more quickly. This increase in volatility means that a shipping company may charge a higher price to protect themselves against losing money in a rapidly shifting bidding war for a given load.
The changes in shipping rates can be tricky to manage, and near impossible to predict. However, by arming oneself with a little information, you can begin to understand how international shipping is changeable, and what you can do to better manage your relationship with it.
