As one of the most efficient and convenient ways of shipping commodities, maritime transportation is a substantial process for maintaining the healthy environment and prosperity of the merchandising realm. This is the reason why many marketers of today center their businesses on optimizing maritime transportation system security at a global level. And, while the security system of this shipping environment is taken good care of, the volatile nature of freight rates is a big challenge for importers and exporters.
The changes in freight prices rely heavily on a number of critical factors that are interrelated and define the current and future trends in the economics of freight rates. Let’s venture to take a closer look at what brings severe uncertainty in the costs of freight transport!
Type and Quantity of Goods
This critical factor is the most considerable one when it comes to establishing a freight rate. Apparent as it may sound, valuable and costly commodities entail high prices. Less precious goods are cheaper, which means that their shipping is normally less expensive. Also, the quality of the goods being transported is another important aspect affecting cargo prices. If the commodities are considered large-scale equipment and thus dubbed oversized cargo, the rates will certainly jump.
Location of the Origin of Goods and Their Destination
Depending on the location and destination points of goods, there may be differences in loading and unloading conditions, level of port tariffs, and how long the transportation takes. These aspects greatly impact the shipping price. If, for example, the distance between the location of origin and destination is small, then the rates, in their turn, will be low, since transportation will require less time.
Holiday and Seasonal Factors
This is an extremely important factor that alters the criteria for pricing the shipping of ocean freight. Yes, transiting cargo before Thanksgiving Day or Christmas will be a lot more expensive than carrying goods during any other period of the year. Another factor to be mentioned in this section is the season of the year. It also plays a significant role in the changing of ocean freight rates. The period from September to February is the high season of shipping, which makes it the most costly time of the year for transporting goods.
The Type of Vessel
As you may know, different types of vessels require different maintenance rates, too. Ships differ in their sustainability and airworthiness, which define the freight rate. If commodities are being carried on a vessel with high sustainability, for instance, the rates will obviously jump. Some other crucial aspects taken into consideration when evaluating the vessel are its technical characteristics and conditions. Again, the better the conditions, the pricier the shipping.
Government Interventions
Many governments are known for restricting the shipping of certain goods. Restrictions also impact freight rates and force importers to pay twice as much as they would without imposed limitations. Phenomena such as widely spread drug trafficking and other illegal practices have driven the authorities of some countries to harshly control some routes, which increases the prices for cargo delivery. Government restrictions form a tremendous obstacle that prevents businesses from shipping their goods seamlessly.
Weather Conditions
This is a factor of considerable gravity, too. Almost all shipping relies on weather conditions, being at high risk if they are unfavorable, and costing very little otherwise. But the most heavily dependent on weather conditions are the areas subject to hazardous, unstable weather, including typhoons, tornadoes, and tsunamis. These conditions make freight rates jump heavily, forcing entrepreneurs to splurge large sums on shipping.
Trade Policies Between Countries
Economical and political relations between the countries is another highly influential factor in setting shipping prices. If countries have a beneficial, warm relationship, then it’s most likely that freight rates will be attractive for both parties. Trade policies make up one of the most challenging and tough aspects of cargo shipping, driving merchandisers to come up with creative and sometimes unpopular methods for settling their freight issues. The political environment plays one of the key roles in realizing maritime transport services.
Drawing the Line
Over the years, the fluctuating nature of freight rates has become a huge challenge for merchandisers. A change in the current financial trends in cargo delivery is extremely hard to predict, which adds to the urgency and inevitability of solving this problem of modern transport rates. To date, there have been several noteworthy strategies for managing this global issue; however, every given strategy has its own minor inconsistencies that prevent it from being the ultimate way to help with price inconveniences in shipping across the world. The only effective solution to this omnipresent problem is being aware of the critical factors we have covered in this article and conducting your shipment operations based on your knowledge!
