Ocean Freight Rates: Freight or Traffic Rates

Ocean Freight

Ocean freight is the most common mode of transport that importers and exporters use. In fact, a full 90% of everything is shipped by ocean freight and sea freight. The other international freight transport modes (courier, standard air freight, express air freight) are all faster, but they are also more expensive. Smaller shipments, and products with a high value, generally go by these other modes.

If ocean freight is too slow, but air freight is too pricey, some freight forwarders are now offering a relatively new service, often called expedited freight. This service is often nearly as quick as air freight, but it costs more like ocean freight. It works by streamlining ocean freight processes and only tying in with the faster ocean services and premium trucking services.

Why Choose Sea Freight Over Other Shipping Methods?

1. Capacity and Value

One container can hold 10,000 beer bottles! And ocean freight is cheaper. As a rule of thumb, any shipment weighing more than 500 kg is too expensive for air freight. For light shipments, use this chargeable weight calculator to work out whether your shipment will be charged by actual weight or dimensional weight. For live international container shipping rates see our FBX index.

2. Fewer Restrictions

International law, national law, carrier organization regulations and individual carrier regulations all play their part in defining and restricting what goods are considered dangerous for transport. Generally, more products restricted as air cargo than ocean freight, including: gases (e.g. lamp bulbs), all things flammable (e.g. perfume, Samsung Galaxy Note 7), toxic or corrosive items (e.g. batteries), magnetic substances (e.g. speakers), oxidizers and biochemical products (e.g. chemical medicines), and public health risks (e.g. untanned hides).

3. Emissions

CO2 freight emissions from ocean freight is minuscule compared with air freight. For example, according to this research, 2 tonnes shipped for 5,000 kilometers by ocean freight will lead to 150 kg of CO2 emissions, compared to 6,605 kg of CO2 emissions by air freight.

FREIGHT RATES

Freight rates are used to calculate the cost of a completed freight job. This is used for invoicing and reporting in eCargo.

A freight rate is a negotiated price for shipping a freight container from one part of the world to another.

Freight rates that are tied to contracts have a validity period that defines the length of time that the freight rate is valid. The validity of a freight rate will depend on if it is based on a short-term contract or a long-term contract.

Xeneta considers short-term contracts to be less than 32 days and long-term contracts to be longer than 88 days in terms of their validity.

Trade Lanes

Freight rates are tied to specific trade lanes.

A trade lane is a route from an origin port to a destination port on which freight is shipped. Because logistics of port to port shipping are complex, a freight rate will sometimes include multiple smaller ports as part of the larger route. The price of moving the freight between the smaller ports and the larger ports may very well be included in the total freight rate.

At its core, Xeneta provides a price benchmark for shipping freight between most ports globally.

Surcharges

Freight rates are typically associated with a number of surcharges. Surcharges are additional fees involved with transporting the freight container, such as loading the container, processing the cargo documentation, or providing security for the container.

Many surcharges are common to all service providers: fuel fees, documentation fees, and piracy fees. Other surcharges vary based on the carrier, port, global events, and seasons. A common charge applied to cargo based on the location of the port is the terminal handling charge, which is the fee paid for loading and unloading cargo at the port of origin and destination.

In summary, the total cost of shipping a freight container is the combination of the base freight rate and additional surcharges.

Aggregation

A single rate by itself will not say very much about the freight market.

Xeneta offers insight into the freight rate market by collecting freight rates from across many participants in the market, including Beneficial Cargo Owners (BCOs) and Freight Forwarders (FFs).

As a platform, Xeneta provides an aggregated high-level view of the freight market. When we say aggregation, we mean that across a single trade lane many valid rates are combined into a single value — usually a market average — to provide a clear picture of what the market prices as a whole are like on that trade lane.

Aggregation is done historically, for the current day, and for long-term contracts extending past the current day.

Benchmarking

Because Xeneta offers an aggregated value that depicts the freight market at large, this value can be used to benchmark your own freight rates against the market.

Xeneta offers five market positions that illustrate different parts of the market. In this way, you can compare your prices against the market average, as well as the best and worst performers across the entire spread of the market.

By comparing your own prices to the market, you can understand where your organization can find improvements and efficiencies. Moreover, Xeneta’s analytics can show you the saving potentials — that is, the possible savings in dollars — of your organization.