No matter whether you are a retailer, wholesaler or manufacturer, if your business encompasses inventory then, cargo rates otherwise known as Freight charges are one of the key costs for doing business. As a result, you are directly or indirectly affected by these and should keep a close tab of major factors that affect cargo rates be it air cargo, land cargo or ocean/sea cargo. Before forwarding goods, a freight forwarder analyzes and chooses the appropriate mode to ship cargo and hires a shipping company or Cargo Company for this.
The charge or price at which a product is delivered to different places from a point is called Cargo rates or Freight rates. This rate depends on a variety of factors like the weight of cargo, mode of transport, distance in between source and destinations, demand for cargo, brands, seasons, fuel costs etcetera. If a shipper doesn’t have adequate information and knowledge of all applicable air cargo rates or ocean cargo rates or land cargo rates depending upon the transport means they are opting for, they might even end up making a huge loss.
Cargo rates -especially in the international shipping industry- are generally unpredictable. The small and medium shippers suffer experience thus instability even more. Even if these cargo rates are volatile and often be uncertain, they are not an ample mystery and the can be estimated and summarized by some of the factors.
For clarity, below we have discussed which and how different factors affect air, sea and land cargos.
Factors that affect air cargo rates:
Used by importers and exporters globally, Air cargo is popular for its rapid and reliable service. Weight and Volume are considered significant factors for air cargo. The speed, reliability, and protection are the reason you should ship by air. However, this is definitely not the greenest or salubrious way due to the high carbon dioxide emission.
So, the question: what do air cargo rate depend upon?
Speed is one of the crucial factors according to which Air freight cost differs. Almost every delivery company has a fixed standard price for normal deliveries. If you want a rapid delivery you will have to pay a further charge. In fact, there are also some companies that can deliver products in a single day in matter of emergency as long as you are willing to pay a high price.
The number of individuals belonging to different specialty engaged in shipping or delivering you product can modify the cargo rates. If your product needs to be handled by a team of pros, the amount of money you will be paying as air cargo costs will be higher to cover the manpower. Manpower also comprises people who take responsibility and handle the paperwork of your cargo.
Another factor that plus or minuses air cargo rates are the containers used for shipping/transporting. These containers serve the role of cargo protectors during the transit and it differs depending upon the kind of cargo. The shipping containers are also called System Load Products and these affect the cargo rates depending upon the need of special containers to safeguard your goods.
This is quite a normal attribute and you are likely to already know how this affects the air cargo rates. The basic principle of Economics- the more people want a service or good, the more it is going to cost. This follows in air cargos as well. Soaring demand of Air cargo service corresponds with the air freight rates.
Factors that affect sea/ocean freight rates
Ocean/ Sea cargo is a very reliable way of transporting goods. Generally, Sea cargo rates are standardized and preset. But given the unpredictability of this field, it’s wise to be updated on the factors that affect these rates. Check out the following factors that affect the rates of sea/Ocean Cargo.
Depending upon the season, the freight rates you are to pay might be more or less than usual rates. For example, transporting products during the off-season will result in higher cargo rates. Likewise, some of the goods like grains and fruits will have higher cargo rates during some seasons or festive time.
capacity The cargo are placed in containers for their safety and other reasons. Depending upon this, the sea Cargo rates can highly fluctuate. The freight rates include the charge of the entire container even if the goods aren’t completely full unless you go for Less-Than-Container-Load (LCL).
Demand and Supply
This simple economics applies here too. More the demand, the more the ocean/sea cargo cost will be. To be updated in the market rather than being shocked at the bills.
The sea/ Ocean freight is influenced by the types of goods. For instance, dangerous cargo results in higher cargo rates. This is due to the corresponding requirement of skilled manpower, appropriate containers etcetera. Other cargo like heavy goods, perishable goods also have higher freight rates than the usual goods.
Ocean/ Sea freight rates are dealt with US dollars globally. So, the strength or the value of US dollar highly affects the shipping cost of cargo. Stronger the US dollar currency with respect to your country, the more expensive the ocean fright is.
Factors that affect land cargo rates
Land transport refers to the transport of goods or services from one place to another. Land cargo is often the opening as well as the final stage of freight transport and sometimes the intermediate as well. The land cargo rates depend upon the following factors.
- Fuel cost
- Distance between the source and location of delivery
- Tariff rates, cargo weights, and density.
- Land cargo demand etcetera.