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What factors influence the determination of maritime freight rates?

Updated: Jun 27



Maritime transport plays a vital role in global trade, moving goods across oceans and connecting countries in an interdependent logistics network. However, understanding the factors that influence maritime freight rates is crucial given their complexity and impact on the global economy.

 

Causes and Consequences in the Maritime Freight Market

The determination of maritime freight rates not only affects the businesses and consumers that use this service but also has repercussions on the global economy. Understanding these factors is essential for anticipating price changes, mitigating risks, and optimizing logistics operations.

 

How is FCL Maritime Freight Defined and What Are Some Types of Rates?

Full Container Load (FCL) maritime freight involves reserving an entire container for a single shipment. Some of the types of rates through which this type of freight is traded include:

 

Rate Type

Description

Details

SPOT

This refers to a one-time price that is set for a specific shipment at a particular moment.

It can vary depending on factors such as vessel space availability, market demand, and current conditions.

BY VALIDITY PERIOD

A rate agreed upon for a specific period, typically ranging from several weeks to a year.

This can be more advantageous for customers who make regular shipments and want to avoid market volatility.

CONTRACT

This involves an agreement between the customer and the shipping line to set a specific rate for a determined volume of shipments over an agreed period.

It offers benefits for both the customer and the shipping line, as it provides price stability and ensures a certain level of business for the shipping line.

ALL-IN

This rate includes all costs associated with the transportation of the cargo, at various service levels (potentially door-to-door).

It is a simplified rate that offers transparency to the customer by including all costs in a single rate, making it easier to plan and budget for the shipment of goods.

 Who are the main actors involved in determining maritime freight rates?

Actors

Description

Functions

CARRIERS (LINES) 

Companies that operate cargo ships that transport goods by sea.

Provide maritime transport services, managing the logistics and operation of the ships.Control the supply of space on their ships and set the freight rates.Are responsible for the safety of the cargo during transport and guarantee that the shipments arrive at their destination in a timely manner and under appropriate conditions.

NON-VESSEL OPERATORS (NVOS) 

Intermediaries in the maritime transport process that do not own their own ships.

Act as intermediaries between clients who need to ship goods and the shipping lines.Negotiate rates, coordinate transport, and manage the documentation required for shipping cargo.

NON-VESSEL OPERATING COMMON CARRIER (NVOCC) 

Similar to NVOs, but have the ability to issue their own bills of lading and assume greater responsibility for the cargo.

Provide integrated logistics services, including cargo consolidation, shipment tracking, and customs clearance management. Purchase cargo space from shipping lines and resell it to clients under their own bill of lading.

FREIGHT FORWARDERS 

Companies specializing in the organization and coordination of international cargo shipments.Their main function is to manage all the logistical aspects of transporting goods, from pick-up at the origin to delivery at the destination.

Offer multimodal transport services, managing not only maritime transport, but also land and air transport when necessary.Negotiate rates with transport providers, prepare the necessary documentation for export, and arrange for customs clearance at the destination port.


What factors influence the determination of maritime freight rates?

Economic Factors


Supply and Demand of Ships and Equipment (Containers, Chassis):

The availability of ships and transportation equipment, such as containers and chassis, impacts rates. When demand for transportation is high and the supply of ships and equipment is limited, rates tend to increase.

Peak Season:

 

During periods of high demand, such as the holiday season, rates tend to rise due to the scarcity of space on ships and the competition for cargo capacity.

Global Economic Cycles:

Economic cycles, such as recessions or expansions, can affect the demand for maritime transport and, consequently, the rates. During economic downturns, demand for transport may decrease, putting downward pressure on rates.

 

Logistic Factors


Operating Costs:

The operating costs of shipping lines, such as fuel, labor, vessel maintenance, and security, impact rates.

Itineraries, Distances, and Navigation Routes:

Itineraries, distances between ports, and navigation route conditions affect transportation costs and, consequently, rates.

Port Infrastructure:

The efficiency and capacity of ports for loading and unloading goods influence rates by affecting transit times and operating costs.

Loading and Unloading Capacity:

The ability of ports to handle large volumes of cargo and the efficiency in the loading and unloading process can affect costs and, consequently, rates.

Regulatory and Political Factors


Government Regulations:

Government regulations, such as safety and environmental requirements, can increase the operating costs of shipping lines, which could be reflected in rates.

International Trade Agreements:

Trade agreements between countries can influence trade flows and, consequently, demand for maritime transportation and rates.

Geopolitical Conflicts:

Geopolitical tensions, such as armed conflicts or economic sanctions, can disrupt navigation routes and increase insurance costs, impacting rates.

Environmental Factors


Emission Regulations:

Regulations on greenhouse gas emissions and pollutants may require investments in cleaner technologies by shipping lines, which could affect rates.

Emission Regulations:

Extreme weather events, such as storms or hurricanes, can disrupt port and maritime transportation operations, which may increase costs and, consequently, rates.

Technological Innovations in Maritime Transport:

The adoption of new technologies, such as fuel-efficient vessels or fleet management systems, can reduce operating costs and potentially influence rates.



Impact of Alliances and Agreements among Shipping Lines on Maritime Freight Prices

Alliances and agreements among shipping lines have a significant impact on maritime freight prices, as these collaborations allow companies to optimize their routes and enhance operational efficiency. A prominent example is the 2M alliance between Maersk and MSC, established in 2015, which has influenced rate structures through service consolidation and shared capacity. This strategy has enabled operational cost reductions, theoretically resulting in more competitive rates for customers. Conversely, the dissolution of alliances can also lead to market fluctuations, creating uncertainty and potential rate increases due to the lack of joint capacity and increased individual competition among companies.


Evolution of Maritime Freight Rates in Recent Years


Pre-Pandemic:

  • Before the pandemic, maritime freight rates remained relatively stable, with slight fluctuations due to seasonal supply and demand. Strategic alliances between shipping lines helped maintain balance in the market, avoiding overcapacity and excessively low prices.


US-China Trade War:

  • The trade war between the US and China, initiated in 2018, significantly impacted freight rates. Tariffs imposed by both countries led to a restructuring of global supply chains. Many companies sought alternatives outside of China, increasing demand on other maritime routes and consequently, freight rates on those routes.


Pandemic:

  • The COVID-19 pandemic drastically altered the maritime freight market. Initially, the global demand drop and lockdowns led to a decrease in maritime trade and a fall in rates. However, the rapid recovery and increased demand for consumer goods during the second half of 2020 and in 2021 created capacity shortages and a significant increase in freight rates, reaching record levels on several major routes.


Post-Pandemic 2022-2023:

  • In the post-pandemic period, freight rates began to stabilize but remained high due to ongoing disruptions in supply chains and container shortages. Labor shortages at ports and rising operating costs also contributed to keeping rates high.


Russia-Ukraine Conflict:

  • Russia's invasion of Ukraine in 2022 added a new layer of complexity. Sanctions imposed on Russia and uncertainty in Black Sea routes affected rates and the availability of alternative routes. The diversion of ships to safer but longer routes increased operating costs and, consequently, freight rates.


2024 and the Crisis in the Red Sea:

  • In 2024, the crisis in the Red Sea, caused by attacks from Yemen's Houthi group, significantly reduced commercial traffic through the Bab el Mandeb Strait and the Suez Canal. This disruption resulted in an increase in rates due to the need to divert ships through longer routes, such as the Cape of Good Hope, increasing transportation time and costs.


Sustainability in Maritime Transport:

  • Sustainability has become a key concern in maritime transport. Stricter environmental regulations and the transition to cleaner fuels are increasing operating costs for shipping lines. Initiatives such as the EU's Emissions Trading System (ETS) for the maritime sector could also influence rates, as additional costs are passed on to end consumers. However, adopting more sustainable practices is essential for the long-term viability of the sector and reducing its environmental impact.


The dynamics of maritime freight rates are complex and influenced by multiple factors, including strategic alliances, geopolitical conflicts, and the pursuit of sustainability. Stakeholders in the sector must adapt to these variables to mitigate risks and seize opportunities. This is crucial for companies involved in maritime trade to maintain constant vigilance over market trends and developments. Contact us to discover the best strategy for your operations.

 

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