What makes freight rates rise and fall

As one of the most efficient and convenient ways of transporting commodities, shipping goods by air, sea, or rail is a substantial part of maintaining a healthy environment and prosperity of the merchandising realm. This is the reason why many logistics companies in the Middle East today center their businesses on optimizing transportation system security at a global level. And, while the security system of this shipping environment is always kept at a high standard, the volatile nature of freight rates is a big challenge for importers and exporters.

So what makes freight rates rise and fall?

The oscillations in freight prices rely largely on a number of crucial factors that are interrelated. These critical factors define the current and future trends in the economics of freight rates. We are here to help you venture into this system. Let’s take a closer look at what brings this severe uncertainty in the costs of freight transport!

Moving truck
When the distance between the location of origin and destination is small, then the rates decrease, since transportation will require less time.

Stating the obvious: Type and quantity of goods

The type and quantity of goods is the most considerable factor when it comes to establishing why freight rates rise and fall in such a dramatic manner. Apparent as it may sound, valuable and pricey commodities entail high prices. Less rare, precious, or lower quality goods are cheaper, which means that their shipping them through the national shipping company of Saudi Arabia is consequently less expensive. Also, the quality of the goods you choose to transport is another important aspect affecting cargo moving prices. If your cargo consists of large-scale equipment it will be marked as oversized cargo, and as a consequence, the rates will jump in proportion to their bulkiness.

Location of the origin of goods and their destination will make freight rates rise and fall

Depending on the location where your cargo starts off on its journey and what the destination points of goods are, there may be differences in loading and unloading conditions, level of port tariffs, and how long the transportation takes. These aspects will have a major impact on the shipping price. In return, when the distance between the location of origin and destination is small, then the rates, obviously, get lower, because transportation requires less time.

Holiday and seasonal factors impacting how the freight rates rise and fall

The season of the year is an extremely important factor that alters how the freight rates rise and fall. The criteria for estimating the shipping prices of ocean freight, for example, imminently change when you’re transiting cargo before Thanksgiving Day or Christmas. It is a lot more expensive than to ship goods during any other period of the year. Another factor to be mentioned in this section is the month of the year. It plays a big role in the changing of freight rates. The period from September to February is the high season of shipping, and it is when freight rates rise the most.

The girl working on a computer
Some other crucial aspects taken into consideration when evaluating the vessel are its technical characteristics and conditions.

How the type of vessel can make the freight rates fluctuate

You may know this, but different types of vessels you choose to carry your cargo require different maintenance rates, too. Even among ships, which differ in their sustainability and airworthiness. These levels of sturdiness and costs of maintenance define the freight rate. If you choose sea shipping on a vessel with high sustainability, for instance, the rates will be higher. In conclusion, the better the conditions, the pricier the shipping.

Government restrictions on shipping activities

Many governments restrict the shipping of certain goods. Restrictions therefore often impact freight rates and, as a result, these practices force importers to pay twice as much as they would if it weren’t for these imposed shipping limitations. Occurrences such as widely spread drug trafficking and many other illegal activities have driven the authorities of many countries to harshly control some routes. This system inevitably increases the prices for cargo delivery. It’s needless to say that government restrictions are a tremendous obstacle that prevents businesses from shipping their goods seamlessly.

Weather conditions

This is a factor of considerable importance. All types of shipping vessels and vehicles rely on weather conditions. There is always a higher transportation risk if they are unfavorable, and they end up costing more in bad weather. On the other hand, shipping will cost much less if it is the other way around. Typhoons, tornadoes, and tsunamis will make freight rates jump heavily, forcing entrepreneurs to splurge large sums on shipping.

Trade policies between countries are a major factor to the rise and fall of freight rates

Economical and political relations between the countries is a very important factor in setting shipping prices. If countries have a beneficial relationship with a lot of reciprocation, usually the freight rates are attractive to both sides. Keep in mind that global trade policies are one of the most challenging and tough aspects of freight rates rising and falling in the shipping industry. It is what drives merchandisers to come up with creative and oftentimes unpopular methods for settling their freight issues. The political environment between countries across the world plays one of the key roles in realizing maritime transport services.

Stormy clouds
The most heavily dependent on weather conditions are the areas subject to hazardous, unstable weather.

Drawing the bottom line

In recent years, the unsteady nature of freight rates has become a huge challenge for merchandisers. The future financial trends in cargo delivery are extremely hard to predict. Which adds to the importance of solving this problem. Several noteworthy strategies have been promoted in an effort to manage this global issue. However, every strategy to date has its own variety of inconsistencies. This┬áprevents it from being the ultimate way to help with price fluctuations in shipping across the world. The only effective solution to this global problem is simply – being constantly aware. Learn all the critical factors we have explained in this article. Then conduct your shipment forwarding based on your newly acquired knowledge!

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