Like other markets, mainly two major forces determine the freight rate in container shipping market
- the supply of the container shipping service
- the demand for this service
So What Determines International Shipping Costs?
A basic economic model explains the determination of market price by equating the supply with the demand. Despite all the technological advancements in weather analysis and prediction, fortification of hull structures and pinpoint accurate navigation equipment, shipping is still an un-mastered art. Shipping companies have long since known this fact and set up different measures in an attempt at minimizing the risk for both clients and themselves. Insuring the vessel and the goods, has for the better part of shipping, been the first line of defense. From the docks in London where shylocks struck deals to the modern boardroom contractual signings, the principle remains the same: shipping is risky business. Costs increase understandably with travel distance and cargo size.
Working an Angle: Getting Cheap International Shipping For Your Goods
The fluctuation of the shipping market coupled with the recent global financial crisis, has unbalanced the profitability in the container shipping industry. According to supply chain digest, the rate to ship a container from Asia to Europe plunged from USD 2800 to USD 700 in 2008. According to Drewry Shipping Consultants, compared to 2006, global carriers moved 14.7 percent more cargo, but earned 1.2 percent less revenue in 2008. Determining the finest rates in shipping costs requires detailed market surveys especially in a country with so many independent and international freighter firms such as America. Different exporters have different shipping contract requirements ranging from small parcel contracts to entire freightliner cargo contracts. Some recommendations in determining the lowest rate include:
a) Modifying small parcel freight contracts by making small changes in an accessorial charge, carrier tariff schedule, service incentive, deferred incentive, minimum net charge, or carrier surcharge can substantially reduce shipping costs.
b) Seeking professional carrier negotiation assistance from firms such as Source Consulting who boast of reducing most of their clients’ shipping costs by at least 12 percent.
c) Expertise and experience of the shipping or freighter firms. A long-standing firm with centers all over the world would prove useful in any emergency situation requiring immediate assistance rather than a single station firm that could strand a client’s goods for weeks in order to establish repairs.
As earlier established, the forces of demand and supply determine the prevailing costs in the shipping costs market. This however can fall secondary to human intervention in the form of government legislations to protect its economy and people. In the US, the source nation for most of its imports determines the level of security and scrutiny given to the goods. For instance, the Chinese toys recently impounded by customs officials due to the hazardous levels of Lead found in them. The best rates and factors affecting price vary but due to the many number of companies offering the service competition between them will eventually work in the favor of the client similar to what has happened in Asia. Some of the international shipping firms that offer cheap international shipping include: APM-Maersk, Mediterranean Shg Co, CMA CGM Group and COSCO Container L.