What causes shipping rates to be so volatile?
In recent years, we have seen a lot of peaks and valleys in container shipping rates. It is difficult, even for people who have been in the industry for a long time, to assess why rates now fluctuate so much sometimes. A trend that started years ago is the emergence of alliances between shipping companies. As a result, on some routes, there has been virtually no competition with the result that rates have grown tremendously. The effects of volatility can sometimes be destructive to an industry that relies heavily on importing or exporting products! The impact of fluctuations in tariffs vary by industry. If you are shipping a container of very high value and valuable goods, the impact is smaller than if you are shipping, say, a container of sofa sets.
Shipping rates can be volatile for a number of reasons:
1.Fluctuations in supply and demand: The demand for shipping transportation can fluctuate due to changes in the economy, such as growth or recession. If there is an oversupply of ships and little demand, rates may fall. On the other hand, if there is a shortage of ships and high demand, rates may increase.
2.Oil prices: Fuel costs are a major expense for shipping companies, and if oil prices rise, it could lead to higher shipping rates.
3.Currency fluctuations: If the value of one currency changes against another currency, this can also affect shipping rates, especially if the shipping route extends across different countries with different currencies.
4.Investment in new ships: If there is investment in new ships, this can lead to a surplus of ships, which reduces rates.
5.Weather conditions: Poor weather conditions can complicate shipping routes, causing ships to travel longer and increasing costs.
6.Wars, conflicts and political unrest: Wars, conflicts and political unrest can make shipping routes unsafe, causing ships to divert or even stop sailing altogether, leading to higher rates.
7.Regulation and legislation: New regulations and legislation, such as safety and environmental regulations, can increase costs for shipping companies, leading to higher rates.
Because of these reasons, shipping rates are often volatile and can change rapidly. Thus, companies and individuals involved in international trade must take this volatility into account and adjust their contracts and budgets accordingly.
Conclusion:
In principle, everyone would benefit from an environment where rates do not fluctuate much, but then volumes would also have to remain the same. This, of course, is a Utopia. Heavy Cargo Logistics acts as freight forwarder to ensure that your goods are shipped for the right price and under the right conditions. Feel free to contact us and let us be your extension in taking care of competitive rates!