What Are The Factors Influencing The Cost Of Shipping Containers?

It’s been a wild ride for all those who rely on overseas freight transport from China. Whether you're moving pallets or shipping containers from East Asia the rates have fluctuated up and down just like the stock market and there’s lots of uncertainty as to what exactly causes that. After reaching out to a container transport company for a quote on a forty foot shipping container from Yantai City, Shandong Province to the United States, the initial reaction was that pricing has not come down. It’s quite ironic because news outlets have been reporting that shippers should expect to see a decrease in rates due to trade slows in February. The freight company went on to say how it was the war in Ukraine that is leading to the continuous increase in shipping costs of containers from East Asia. Unsure if that’s correct or not, brands still need to transfer their products from overseas and are often subject to expensive shipping quotes with absolutely no clarity. The objective of this article is to gain some insight as to what causes container shipping rates to fluctuate, bringing a bit of understanding to a complex marine logistics industry.

Spoiler Alert: Cost of Shipping Extends Beyond Marine Logistics

Elementary shippers will request a quote from an international freight transport company for a single forty foot container from East Asia to North America. Looking at the rate table from Freightos, in December 2022 that rate was at $2,924 and on March 17th 2023 it dropped to $2,198. But there are still port and land logistics fees to get the shipping container to its final destination. Those rates could fluctuate as well and impact your final freight bill. That’s why it’s imperative to be affiliated with a trusted intermodal logistics company that could receive your container at port and deliver it to its final destination at the most cost effective rate. The last thing any shipper wants is to have a container sitting around at a terminal adding to your shipping costs. So before we document any factors we are going to make a clear distinction that land and sea have different variables as to what causes the shipping rates to fluctuate.

Fuel Cost For a Container Ship

Just like automobiles and trunks filling up at the pump are subject to fluctuating fuel costs, so are big container ships. The only difference is that filling up a 300 gallon trailer costs $3.63 per gallon average costs $1,089, while a huge container for a ship that holds anywhere between 1.5 and 2 million gallons fuel costs are astronomically higher. As per ships that are post-Panamax or New Panamax they can hold anywhere between 2.5 to 3.5 million gallons of fuel. That is a hefty price to fill up and that is exactly why these marine logistics companies are simply passing the costs over to the customers who are shipping their containers on board their vessels.

Besides for the regular costs that we know of such as taxes included in the per gallon fuel rate marine vessels are subjected to international rates that are put in place by the International Maritime Organization or better known as the IMO. This includes price reductions for vessels that are more fuel efficient and produce less emissions. For example, ships with exhaust gas scrubbers or burn liquefied natural gas will pay significantly less for fuel than traditional vessels. This has led to the mass scrapping of older vessels and the lack of new cargo ships being produced. Marnie logistics companies are patiently waiting for technology to bring to market ships that are IMO certified that either produce zero emissions or significantly decrease fossil fuel consumption. Until then, marine logistics companies will continue to retire older ships to avoid increased fuel costs. All these factors impact the bottom line price for shipping a container from overseas that is passed along to the customer.

Route For Freight To Travel

When you send a parcel that is larger than the average office envelope that rate will depend on two primary factors, weight and distance. Costs for shipping a container via routes that are shorter will be significantly less than that of a longer route. To get a glimpse we look at live freight rates from Feightos. The current rate on March 19, 2023 for the route from North Europe to China is $399 while the route from North Europe to North America East Coast is $4,180. Though the distance from Europe to the East Coast of the United States is significantly shorter, there is often lots of congestion in big city ports like Rotterdam and the Port of Elizabeth leading to higher rates. On the contrary, the route from East Asia to the West Coast of the United States might be longer but a quicker run for marine logistics companies that results in a cheaper rate. The shipping companies are looking to come into port and leave as quickly as possible. In recent years due to lower exports from the U.S. the containers that are loaded onto the shipping vessels are unfortunately empty. Marnie logistics companies have no patience to wait around and are getting more money per a container from routes initiated out of East Asia.

Port Fees

As containers are hauled off these massive marine vessels via cranes, they are placed onto cars (no they are not really cars, but trucks that can carry multiple containers simultaneously) and directed to an area designated for landing. When the cars get to the area in the port where the container is set down (or stacked up) a high-quality heavy-duty forklift grabs it and sets it in a numbered or color coded spot where a freight trailer can find it for pickup and delivery. But the longer it takes the logistics company to pick up the container the higher the port charges will be. There is never a moment that ports don’t look to throw extra charges at shippers. Below are some of the charges that customers may see on their bill when a container is received at the port.

Port Wharfage Fees: Better known as goods dues, wharfage charges pertain directly to the contents of what’s inside the shipping container. These charges can vary based on the type, weight, volume, and quantity of the goods. In addition, each port may have different rates for goods dues depending on the region of the port.

THC: Terminal handling charge or better known as THC is a charge for all that goes into handling your shipping container. Certain times of the year might see more container traffic resulting in more movement of your goods resulting in higher terminal handling charges. For every movement there is a charge whether you like it or not.

Early/Late Arrival Charge: When you schedule a shipping container parcel initiated from a manufacturing warehouse in East Asia there is a timetable given to all logistics parties involved in getting the goods to its final destination. In regard to the water port, they are given an exact date of the arrival of the shipping container. If for some reason the arrival is sped up or delayed the port will charge you for that. Ports expect your goods to be right on time and anything less than that the shipper will incur added fees.

Demurrage Charge: There is a date that the port provides that your goods should be retrieved by. Each port will have a different window of time when the shipping container must be picked up by. When a container sits around the port or terminal beyond the allotted time period the shipper will incur an added fee called a demurrage charge. The longer the container sits at the port the more demurrage fees it will incur. Keep in mind that these fees are not fixed but cumulative and can add up quickly.

Detention Charge: Not always are customers dealing with fees pertaining to the import of goods. When customers are exporting goods they will often place an order for an empty shipping container. Since the shipping container is owned by a marine logistics company there is an allotted period of time when the port must get the container back to them. If the container is not received by the port within the time period given, shippers will incur a detention fee.

Port Storage Charges: As described before every container is given a designated spot at the port in order for the shipper to direct an intermodal shipping company for its pickup. Similar to municipalities charging a car owner for a parking spot, water ports have port storage charges for shipping containers. Some ports offer free days where they give shippers the opportunity to get their container out of port within a certain grace period. That period is often three to seven days but if it goes beyond that free period don’t be surprised to see added port storage charges.

Cancelation or Revision Charges: It will happen that a shipper will have to make a change or cancel the delivery of goods to a port. This can be for various reasons where either the goods are not ready at the point of origin or the route of the shipping container has changed. Last year when the Port of Long Beach was backed up and ships had to wait weeks and even months to be unloaded, shippers had to change their routes in order to receive goods sooner at other ports in the United States. That led to cancellations and revisions all throughout the shipping container's journey from the Far East to the USA. This resulted in the shipper receiving a cancellation of revision charge from the port.

Customs & Tax

When a shipping container is received by a port the shipper is subject to customs and taxes for that country. It can happen that before a container is received it has to pass through multiple countries resulting in customs and taxes from more than one country. That is why shippers should see to it that their goods are on a direct route that only results in customs and tax fees from the countries of origin and destination.

Final Words

Customers shipping a container from overseas might be in for a surprise when they see their final bill. This can impact your bottom line and how much profit is left in the products you manufacture where labor is cheaper. That is why it is so important to be associated with the right logistics partner to give your 100% clarity on what are the fees you can expect to see on your final bill. They should also be there to advocate on your behalf if there are port fees that are unjustified. Having a trusted logistics partner is key to getting your goods from overseas in the most cost effective way.