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Freight Cost Will Shipping Rates Get Better Or Worse?

by Container Traders

When the world ground to a halt two years ago, markets across the globe similarly faced shutting their doors. The exact opposite happened to the freight industry.

Freight Cost Will Shipping Rates Get Better Or Worse? Freight Cost Will Shipping Rates Get Better Or Worse?

When the world ground to a halt two years ago, markets across the globe similarly faced shutting their doors. The exact opposite happened to the freight industry. 

Despite staff shortages and disrupted supply chains, the planet’s population needed container shipping companies more than ever. Aussies received more than 1 billion packages in 2020 alone, and the e-commerce market grew by 17.9% in two years. But, the sudden increase in demand and unexpected decline in supply shook up international trade and global freight costs. 

What are freight costs? 

Freight costs are also known as moving costs or shipping rates. They are the money owed to the container transport moving company to move goods from port to port in common carrier ship containers. 

Like when you move house, you hire freight companies to transport items from point A to point B. In the shipping industry, carriers might move freight across the land, overseas, or by air.

As a business, you’ll pass container shipping costs to your customers. However, as consumers expect super fast delivery and loyalty discounts, you may struggle to offer competitive pricing. Small businesses have struggled particularly to find cost-effective shipping lines as container freight rates increased.

What factors affect shipping costs?

So why have shipping container freight rates increased in the last few years? Are international container shipping rates likely to get better or worse?

Weakened world economy: Events across the planet affect ship operators freight to Australia. Recent events in Russia and China, higher-than-expected inflation, and recovery from the global pandemic mean the world economy will grow only 3.2% in 2022. 

Supply chain disruption: Political and economic upheaval and recovering cross-border relationships (in a post-pandemic world) hit shipping companies. Even ground shipping relied on goods moving overseas, causing increased shipping costs.

COVID-19 pandemic: More people stayed at home, expecting next-day parcel delivery options. Yet, workforces shrunk, so the gap between supply and demand grew, affecting shipping costs.

How is freight cost calculated?

How are container shipping costs calculated? Freight costs depend on a number of factors:

  • Supply and demand in your industry (and other industries using similar suppliers or logistics companies).
  • The type of equipment needed, for example, container sizes and special packing considerations.
  • Transit time and loading and unloading fees.
  • Air freight or ocean freight cost might include customs duties.
  • Shipment urgency.
  • Current weather conditions.

Are freight costs and shipping the same?

While freight and shipping are often interchangeable, the former tends to refer to more commercial purposes. Shipping freight usually means a bulk delivery of goods. Shipping can be personal or commercial but refers to singular goods or smaller deliveries. Shipping is more expensive because it is cheaper to transport a bulk container load than smaller amounts. 

Who pays freight costs? 

Customers who buy a product from an online business usually have to pay upfront local or international shipping costs. Some e-commerce platforms offer free or discounted delivery for bundles or loyal customers. 

The seller must also pay for the road freight transport between warehouses and container hire. Sellers often include such costs in product prices. However, who pays for freight costs usually gets settled in terms of sale.

What is a container freight rate?

A freight rate is the cost of cargo container shipping to its destination country. Historically, freight rates refer to sea freight. However, today, freight charges include all modes of transportation, which includes.

  • Air freights.
  • Ocean transportation.
  • Trains.
  • Trucks.

The shipping cost depends on the cargo, transport, different sized containers, weight, and distance to the destination port. It should also include labour costs and charges from the customs broker.

Shipping a container overseas

International container ships currently face many challenges. The pandemic, restrictive border control, and the recent Russian war in Ukraine have disrupted international shipping in the last few years.

How much does a 40FT shipping container cost?

To ship international freight, you’ll need a sizable shipping container. 

To ship your 40ft container, you need to discuss contract rates to get a freight quote. Logistics companies would also take into account weight. A full container load (FCL) will cost more overall but less per product. A less than container load (LCL) is cheaper but less cost-effective.

Here are some guidelines specific to the container.

How Much Will Freight Cost in 2023?

Everyone wants to know how much higher freight costs will go up. Since 2020, freight charges have increased significantly. Temporarily inflated prices in 2020 owing to increased demand and supply chain disruption. It’s hard to predict what will happen next. We’re in uncharted waters with extreme fluctuation in freight charges, and we cannot use history as a guide.

While the world recovers from the pandemic, new factors prevent global freight supply chains from bouncing back. Now that the cost of living with rising fuel prices has gone up globally, the freight industry may struggle to bring prices back down. 

Other shipping costs

Running a business means covering other shipping expenses. These might include:

  • Customs clearance and import duty.
  • Marine insurance.
  • Surcharges in peak seasons.
  • Accounting for delays, missing products, and damaged goods.
  • Packing and handling costs.
  • Container inspection fees.
  • General Rate Increase (GRI).
  • Inland delivery charges.
  • Quarantine fees.

As freight charges increase, so does every other aspect of shipping goods worldwide.

What can I do to minimise the impact of increased freight costs?

While global inflation and border restrictions are beyond your control, there are a few things you can do to minimise the impact of increasing freight costs. 

  1. Speak to a range of companies to get quotes. Don’t just stick with your usual carrier if another quality carrier offers a better price. 
  2. Ensure you select the size appropriate for your delivery. Don’t pay for a 40ft container when you may be able to use a 20ft container.
  3. Use a freight calculator to optimise international shipping costs.
  4. Purchase used containers for your goods rather than brand-new ones to save money.
  5. Hiring or purchasing shipping containers might help mitigate rising freight costs. Take a look at our new and second-hand containers.

Summing up

Freight cost has increased exponentially in the last few years. As the world slowed in 2020, the freight industry saw significant demand increases. However, the pandemic (and continued political strife) meant delays and disruption, a situation we have not yet recovered from. 

If you’re interested in purchasing or hiring shipping containers to transport freight more cost-effectively, contact Container Traders today. 

Frequently asked questions

What are freight costs?

Freight costs factor in every charge of transporting goods from point A to point B. This might include mode of transport, container size, weight, and delivery distance.

What are examples of freight?

A freight shipping example might be transporting raw timber from one destination to a manufacturer to make into furniture. Freight includes transportation by sea, air, or across the land on trains and trucks.

What is freight, and how is it calculated?

Use a freight cost calculator to understand how weight, size, distance, and customs charges affect delivery costs. The freight rate index calculates fees based on the dimensions and weight of goods and the time and space between point A and point B.

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