Ocean Freight Rates Are On The Rise

Ocean freight rates are once again on the rise.  This is particularly true of ocean container shipments.  In the last months average ocean freight rates (container transport particularly) have climbed up to 55%.  Have you renegotiated your rates lately?  If not now is the time!

Effectively negotiating ocean freight is not so simple and depends on knowing a fair amount of detail.  Will you have many “one-time” shipments, or more a repetitive business with each shipper?  How much product are you shipping at one time, or if repetitive, each shipment?  If repetitive, how often?  Answers to these questions determine if you want to use a freight forwarder or negotiate directly with the ocean carriers.         

Door to door transit time is also a huge consideration.  Will you ship to a major or “gateway” port and then truck to multiple distribution centers?  Or will it all go to one DC?  If you are planning on moving the containers intact to an inland DC, some difficulty may arise depending on the ocean carrier, and rail charges can be quite high.  A forwarder (or the customs broker) can often manage the container delivery trucking to and from the port much better than a carrier (if the carrier even would).  Otherwise you must arrange the trucking.

There are quite a few charges that may be a part of the total ocean / delivery transport costs on a typical import shipment.  Some may be negotiable with the carrier / forwarder (given sufficient volume and frequency) and if you understand how ocean freight rates are calculated. 

Some of the most common ocean freight cost components include:

BAF    - Bunker Adjustment Factor Surcharge

ACC    - Alameda Corridor Surcharge

PNC    - Panama Canal Charge

SUZ    - Suez Transit Surcharge

PSS    - Peak Season Surcharge

AMS    - Advance Manifest Surcharge

CHS    - Chassis Usage Surcharge

CAF    - Currency Adjustment Factor

DDC    - Destination Delivery Charge

THC    - Terminal Handling Charge

ARB    - Origin Arbitraries

AGS    - Aden Gulf Surcharge

WRS   - War Risk Surcharge

Depending on your terms of sale (Incoterms) you may pay origin charges including:

ORC    - Origin Receiving Charge

ODF    - Origin Documentation Fees

THC    - Terminal Handling Charges

DTHC  - Destination Terminal Handling Charges

If your shipment is moving inland from the port you may pay:

DDC    - Destination Delivery Charges

IPI      - Inland Point Intermodal or MLB - MiniLandBridge

IFC     - Inland Fuel Surcharge

In addition, your container freight rate may depend on the actual commodity being shipped. 

Of course there are the myriad of other costs not directly associated with the ocean freight or container rate, some of which include:

Importer security Filing (ISF or 10+2)

Customs Brokerage

Duty & Taxes

Stripping and / or Transloading of Containers

Interim warehousing

and, and, and …

If you need more detail or clarification, we will be happy to work with you to setup a bid or RFP (Request For Proposal), or to audit or review your current rates and processes for possible improvement.

Whatever you do, plan for success!  The cost and efficiency of your international logistics system is determined by how well you have planned and executed it.  Poor planning can result in much headache and unnecessary expense.  Great success will follow your good planning.

Contact us today or email us at inquiry@raymcguire.com for more information.

Ray McGuire Consulting Group  provides direction, tools and training to help you quickly and successfully execute international and domestic logistics, inventory management, agent/supplier relationships, safety, social, and governmental trade compliance or security programs.

Increasing speed-to-market while reducing costs!

The True Current Crisis in the Ocean Freight Sector

A recent story by Simon Parry of the UK’s Daily Mail is an excellent overview of the true current crisis in the ocean freight sector (Revealed - The Ghost Fleet Recession).  This is a “must read” article if you want to know what is really happening in ocean freight and how it will continue to impact all of us over the next few years.

Like many supply chain professionals I like and read the Journal of Commerce daily, and am up-to-date on the changing numbers side of this issue.  In short, the current (depending on your sources) idle ship statistics are approximately:

Container traffic                 = 12-15%

Roll On – Roll Off traffic        = 20%

Tanker traffic                     = 2-15%

Interestingly, while oil production has dropped about 13%, only about 2% of tankers are listed as idle.  This is partly due to incomplete reporting, but more likely due to oil producers leasing the idle ships to store crude and keep “market” supplies lower  –  Oil Producers Running Out of Storage Space

Simon’s article, however, not only presents the numbers, but has also covered personal viewpoints and details that are typically missing from mainstream industry-related publications.  It is really quite good.

You may want to check with the Journal of Commerce occasionally to get updates.  Here are links to a few of their recent articles (FYI - Box ship = container ship.  TEU = 20 foot container.  Divide by 2 to get 40 foot container equivalent).

This year container lines are set to scrap ten times more ships than average and the most ever recorded in one year 

–  Owners Scrap 94 Ships in First Half - www.joc.com.

Close to 15% of container ships may stand idle by end of 2009 

–  Idle Box Fleet Heading for 2 Million TEUs - www.joc.com.

Roll On – Roll Off (car, truck, equipment carriers) running out of gas

–  Ro-Ro's Slow Go - www.joc.com.

By the way, Baltimore Ro-Ro shipments (the USA’s top Ro-Ro port and No. 2 in automobile exports) are down 14 % this year.

Scrapping or idling ships in this manner serve to drive capacity down and provide the basis for higher rates. 

Contact us today or email us at inquiry@raymcguire.com for more information.

Ray McGuire Consulting Group  provides direction, tools and training to help you quickly and successfully execute international and domestic logistics, inventory management, agent/supplier relationships, safety, social, governmental trade compliance or security programs.

Increasing speed-to-market while reducing costs!