We’ve shared the answers below to our most asked questions for sea freight shipments that we receive as a Freight Forwarding company. If you have any additional questions or would like deeper insight which is personalised to you and your business, call our industry specialist team today on (07) 3207 9537 and they’ll be happy to assist with any questions that you have.
- Why do sea freight costs & rates fluctuate significantly?
One of our most frequently asked questions around freight is in regards to cost and fluctuating prices throughout the year. For businesses trying to keep ahead of these varying costs it can be frustrating.
The demand for shipping services is subject to a number of external pressures, including those of a political, economic and environmental nature. Trade sanctions, conflict, consumer behaviour, bad weather and more can affect demand, and that in turn affects cost. As there isn’t a single predictor or reason in the market, but a varying of factors including (but not limited to):
Destination/distance – the more popular the destination and the shorter the journey, the lower the ocean freight rate. Less common destinations, including those with a reduced capacity to handle freight, are more costly, and the further goods have to travel, the greater the ocean freight rate will be.
Currency – as ocean freight rate is charged in US dollars, the exchange rate has an impact on cost.
Cargo type – the types of goods that are likely to attract higher fees include those that are dangerous, heavy, perishable, or out of gauge (OOG).
Fuel Costs – Bunker Fuel, that’s the name for fuel used to power a ship’s engines, and the cost can fluctuate, meaning the ocean freight rate charged will fluctuate. Bunker fuel has a big impact on the cost of ocean freight.
Seasons – certain goods are in demand, or in higher demand, due to the seasons, for example, in the run up to Christmas or the Chinese New Year. When demand is high prices often rise, whereas when demand is low, they fall.
Vessel size – as the biggest single cost in ocean freight is bunker fuel, the size and capacity of the vessel is important. Bigger vessels might use more fuel, but there are also more containers on board for that cost to be shared between.
Environment – 1 January 2020 saw the implementation of IMO 2020, new legislation introduced by the International Maritime Organisation. The aim is to reduce sulphur oxide gas emissions by using marine fuels with a maximum sulphur content of 0.5%, a hefty reduction compared to the previous limit of 3.5%. The expectation is an increase in cost.
2. What causes sea freight cargo to become delayed?
Delayed shipments are one of the most frustrating parts of freight forwarding for many companies – the time involved, additional costs and waiting customers which has the potential to incur a larger cost (potentially losing clients/ customers). Vessels essentially move in a giant loop, calling from port to port then back again. if one tiny delay occurs at one port it can cause a chain reaction for all the other ports that the particular vessel calls in on, this can add days or even weeks to a transit time. Things that can cause these delays are:
- Impacts from weather conditions.
- Industrial action.
- Vessel quarantine.
- Overbooking of cargo on shipments. (its common for shipping lines to overbook space during peak season, just like airlines do.)
- Vessel malfunctions/mechanical issues.
- Natural disasters.
- Equipment shortage. (no empty containers)
3. What is the wait time at wharfs typically?
“Waiting time” or “Demurrage” refers to the free time a freight or transport company allocates at a wharf – typically these are around 45 minutes. The purpose of this time is to be used to process freight and shipping collections within this time allocated. But this is of course dependent on the demand, traffic and resources available to have the cargo processed.
4. What happens if my goods are damaged in transit?
This depends whether or not you have insured your cargo and are covered for marine transit insurance – we strongly encourage our customers to cover their cargo and we have a partnership with Coverfreight, to make this process easier.
When you’re covered by marine transit insurance: you’ll be eligible to claim on the insurance that you’ve taken out and will follow the process to see how much you’re eligible to receive post their investigation.
If you’re not covered by marine transit insurance: you’re liable for the complete costs of your goods lost.
Having marine transit insurance also covers you if General Average is called. General Average is a principle of maritime law that essentially establishes that all sea cargo stakeholders (owner, shipper, etc.) evenly share any damage or losses that may occur as a result of voluntary sacrifice of part of the vessel or cargo to save the whole in an emergency. This includes the cargo owners, which means exporters and importers may be liable to pay towards the losses of a major incident on the vessel, such as:
- a fire on board
- the ship gets stranded or grounded
- a container stack collapse
Cargo might be partially or fully damaged. And, even if there is no damage to cargo, there will be extreme delays in deliveries until the general average procedures are completed, which may result in penalties, fines and chargebacks from end buyers.
The last time a general average was called was in 2021 with the Ever given being grounded in the Suez canal, Prior to that was 2019 after a fire on the Yantian Express.
General average claims are a risk for importers. Having cargo insurance is peace-of-mind in the case of these extreme cases.
Have another question for our team at PFS?
If you still have questions we weren’t able to answer above – or would prefer to speak directly with our industry specialist team, call us directly on (07) 3207 9537.