Shipping and logistics
Why freight rates move.
Ocean freight is priced on a market that moves week to week, so a rate is a snapshot rather than a price list. Capacity, demand, fuel, canal and port conditions all move it, and none of them are things your supplier or your forwarder controls.
What actually moves the rate.
Six forces, none of which your supplier or your forwarder controls.
- Capacity against demand
- The dominant factor. Ships are ordered years ahead and demand moves in months, so the market spends most of its time out of balance in one direction.
- Fuel
- Passed through as a surcharge that moves with the oil price and with the fuel the vessel is required to burn.
- Routing disruption
- Canal restrictions and diversions add sea days to every vessel on the route, which removes capacity from the market without a single ship leaving it.
- Port and inland congestion
- Vessels waiting are vessels not carrying, and equipment stuck inland is equipment not available at origin.
- Seasonality
- Demand peaks ahead of retail seasons and around the Chinese new year shutdown, which affects Asian export capacity generally.
- Equipment position
- Whether empty containers are where the cargo is. A shortage at origin raises the effective price regardless of the headline rate.
Spot or contract.
Spot rates track the market. They are cheap when capacity is loose and they move against you fast when it tightens, and space is not guaranteed.
Contract rates fix a level and usually a minimum volume for a period. They cost more than spot in a soft market and they are the reason some importers kept shipping when others could not get space.
Most importers of Indonesian goods are too small for a direct carrier contract and buy through a forwarder, which is a perfectly good answer. What matters is knowing which one you are on, because a forwarder quoting a spot rate is quoting today.
What a rate does and does not include.
The ocean leg, and then a list of items that vary: terminal handling at both ends, documentation, seal, and origin charges that can be substantial.
Ask for an all-in quotation to the point you actually want, and ask what is excluded. A low ocean rate with heavy local charges is a common shape.
Demurrage and detention are not in any rate. They are what you pay for being slow, and they are the single largest avoidable cost in container shipping.
How to buy against a moving market.
Quote landed cost with the freight identified separately so a rate change does not silently eat the margin on a product price you already agreed.
Take rate validity seriously. A quotation valid to the end of the month means exactly that, and a delayed shipment reprices.
Book earlier than feels necessary in peak periods, because at those moments the constraint is space rather than price.
Keep a second forwarder in the conversation. Not to squeeze the first one, but so you have somewhere to go when they have no space.
Questions buyers ask.
Why did my forwarder's quote change in three weeks?
Because it was a spot rate with a validity date on it, and the market moved. That is normal in container shipping rather than a sign of anything wrong, and the fix is to note the validity and plan around it.
Should I fix a contract rate?
It depends on your volume and on how much certainty is worth to you. Below a certain size carriers are not interested, and a forwarder relationship with consistent volume achieves some of the same stability.
Is the cheapest quote the cheapest shipment?
Frequently not. Compare all-in to the same delivery point, including origin charges and free time at destination, because free days at the port can be worth more than the difference in the ocean rate.
Read next.
Getting it on a ship
FCL, LCL, own consolidation or reefer, and the five costs that appear after the freight quote. Written for an archipelago.
Working out a landed cost
Everything between the factory price and the shelf. The twelve lines it contains, and the four that buyers forget.
Demurrage and detention
Two different charges buyers confuse, both on a clock that does not care whose fault the delay was.
What a freight forwarder does
Seven jobs, three things they cannot carry, and the question that shows whether they know Indonesia specifically.
Door to door or port to port
Who arranges what, where responsibility sits, and why the simpler-sounding option is not always cheaper.
FCL, LCL or your own consolidation
Three ways to move a part load, and the third one is the one most buyers never consider. What each costs in handling and risk.
Agent or forwarder
Two different jobs that buyers routinely confuse. What each one is responsible for and where the gap sits.
Transhipment
Most Indonesian cargo changes vessel at least once. What that adds and when to pay for direct.
Releasing your cargo
The container arrived and you cannot have it. What has to happen, in order, and where it stalls.
When a port is congested
Vessels waiting, containers stacked, nobody able to give a date. What helps and what does not.
Sourcing from Indonesia?
Tell us the product, the quantity and the destination. We come back with what it involves before anyone talks about money.