Foreign trade professionals have noticed the effects of the logistics crisis recently. Importers are at a cost increase, including the price of international freight.
The import process requires planning and monitoring of what happens not only in Brazil, but also in the world.
In the current scenario, it is important to frequently consult the freight values practiced for the most different routes.
As international freight is included in the cost of imports, one must understand the rates applied in the market.
Follow the following text and learn more about the different types of billing and what can influence the final price to be paid by your company.
What is the reference value of international shipping?
It was early 2020 and the pandemic was beginning to spread around the world, kicking off one of the worst crises in the global logistics sector. During this period, there was a fall in the value of spot freight, reaching US$ 400 per 40-foot container.
Soon after the periods of suspension of production, which began in China and extended to other countries, reached the transport services. Thus, when production resumed activities, the scenario was of high demand for products and raw materials.
Consequently, in this context, transport services have experienced an increase in freight. In recent months, the market has come across international container freight close to $10,000.
This value is about seven times higher than the value practiced in the period prior to the Covid-19 pandemic.
Many external factors contributed to this increase, as we will explain below.
What makes up the price of international shipping?
Freight is defined at the beginning of the negotiations, with the choice of INCOTERM (International Terms of Trade) and modal.
Therefore, the characteristics of the goods to be transported, such as volume and weight, are considered. The calculation will be done based on the variable that is larger between the two.
This means that freight can be calculated per ton (weight) or cubic meter (volume).
In addition, the container type, the places of embarkation and disembarkation and the delivery time are also considered in this calculation. Cargo particularities also influence the price of international freight.
Very fragile or short-term loads tend to have higher freight, as they require speed of delivery to avoid damage or loss.
Read also: What makes up international sea and air freight?
The charge can be done in two ways, according to the movements:
- FCL (Full Container Load): container with its total occupancy;
- LCL (Less than a Container Load): Partially Occupied Container.
Sea freight is calculated from a basic rate, which varies according to the weight or volume of the cargo. The variable chosen for the calculation will be the one that will give the highest profit to the shipowner.
There are other fees and surcharges that can be included in the price of international sea freight, such as:
- bunker surcharge (additional fuel);
- heavy lift charge (overweight goods or that require special handling);
- extra lenght charge (fee for high volume goods);
- currency adjustment factor: (exchange rate adjustment factor).
The value of air freight is composed of the transport of the cargo between the airport of origin and the destination airport.
Prices are established in accordance with IATA (International Air Transport Association) rules. Based on these rules, airlines make up weight bands of goods and determine the prices of those ranges.
For example, a company may apply a flat rate for loads of up to 45kg; other rate for loads up to 100kg; a third for loads up to 200kg and so on.
In addition to this calculation, IATA allows you to cover some fares, according to the route, route and costs. Some of these rates are:
- minimum tariff: minimum value for goods with lower weights;
- General tariff: applied from tracks, according to the weights of the loads. The higher the freight, the lower the rate;
- class rates: tariff that can increase (in the case of high value-added items, dangerous cargo or live animals) or reduce (products of social interest) the percentage in the general tariff;
- ULD (unit load device): tariff applied to unit loads.
Factors that impact the price of international freight
In general, the freight value can be adjusted according to the customer’s need. However, degrees of dangerousness and unitization of the load are factors that can influence the final value.
Business aspects can also make a difference in value. In this case, the form of payment and contract of the transport shall be considered.
Certainly also in this list are the distance to be traveled and the location of nearby ports or airports.
The following are external factors that have impacted the freight price today.
Lockdown in China
The Covid-19 pandemic has had major impacts on the international market. The long periods of isolation imposed in China have negatively influenced the global production chain.
The shutdown of cargo ships, a reflection of the lockdown, caused shortages in the supply of containers. Thus, as a result, the world has come across the increase in the value of international freight.
Lockdown periods in China have still caused high rates of production to fall, leading to product shortages, which leads to an increase in freight costs.
Similarly, the global dependence on the Chinese market influenced the increase in the price of international freight.
After all, high demand and scarcity of products and containers have contributed to further freight costs.
The downtime in the Asian country delayed many shipments of goods. China is a major global supplier and the impacts on the production chain have reflected in the shipment of products to other countries.
The lockdown delayed shipments and, as the situation normalized, ports began to receive more and more goods that should have been shipped weeks or months ago.
As Chinese companies unblocked dispatches and destined volumes abroad, ports began to become overloaded, facing difficulties in draining high demand.
Consequently, this challenge in boarding products has caused delays in the departures of ships. Thus, when we follow the schedules, it is very common to note that there was a day or two delay in leaving, due to the large lines of vessels in the port.
Armed conflicts between Russia and Ukraine
The war between Russia and Ukraine brought repercussions on the price of oil. Throughout that year the barrel has already increased. The conflict also raised the dollar and euro prices and increased inflation rates.
In addition to this impact, routes passing through Ukraine have been diverted to other countries to make it possible to transport goods.
Route changes have also contributed to increased product costs and delivery times, as routes are longer than those usually used.
With longer deadlines, many companies faced periods of scarcity of goods and insums, besides suffering from the high freight values practiced in the current situation.
Fuel price instability
Maritime transport has encountered difficulties with the value of the price of the fuel that supplies the vessels. The Brazilian Association of Cabotage Shipowners (ABAC) estimates that the fuel represents about 60% of the currently spent.
The fuel is quoted in dollars and suffers oscillations every day, as it follows the variations of the international market. In atypical periods like the one we are experiencing, there are other situations that cause impact, such as the closure of ports in China.
Disruptions in logistics flow have decreased demand for bunker, which is the fuel surcharge. Thus, a percentage of the bunker incorporates the basic freight value to ensure that fuel costs generated due to the movement of goods are recovered.
With the outages there was fuel accumulation in the market and, therefore, production decreased.
Thus, when the vessels returned to operate, demand increased a lot and there was not enough fuel to serve the entire market. With a lot of demand, the value of fuel skyrocketed, also raising the price of international freight.
Review your international shipping quotes with Cheap2ship
With so many costs to analyze, companies spend a lot of time evaluating proposals for international freight offerings. Therefore, to reduce this analysis time, we at Cheap2ship provide our customers with a solution for international freight quotes.
Our platform gives you access to organized negotiations that facilitate decision making. Our indicators and charts allow you greater visibility into the scenario and help you make the best freight choice for your import process.
We have a secure and easy implementation system that allows integration with the main ERPs.
Visit our website and know the various plans. Surely one of them can be the solution for your company.