Reasons Why Freight Rate Fluctuates
Each time any of our clients ask about our freight rates, it leaves us demanding more information about their shipments before determining how much it cost. This information is key to determining our air freight rate as well as sea freight rate.
Often times, our responses have caused them to ask for reasons why freight rate fluctuates or why there has not been a fixed rate for freight and customs clearance.
First, the fluctuation in freight rates occurs for several reasons. The determining factors may be internally or externally influenced. Although, amongst other factors, it may depend on the country or location involved.
In this post, we share some external determining factors that most time falls beyond our ability to control. So, whether it is Air freight shipping, Sea freight or Road freight, the cases may be similar, except a few disparities particularly, with road freight.
Take a look at the table of content, and follow as we proceed. Please tell us any other reasons for freight rate fluctuation.
Demand and Supply
Freight rate fluctuates mostly due to demands and supplies. This bothers on the number of ships at a particular port in Nigeria. The lower the number of booking that a shipping line gets, the lower the freight rates, the higher it is, the higher the freight rate.
Depending on the seasonality of particular products being shipped on some trade lanes, freight rate might fluctuate. In this aspect, some consumer goods that are heavily traded in holiday seasons, as well as naturally seasonal such as fruits, vegetables, etc, may ben responsibility.
There is usually a surplus charge of space on shipping vessels during the low demand duration. This period span across the holiday season or those times when prices of a commodity do not favour the shippers.
So, when there is an excess charge on shipping vessels, freight rate drops. This reason has a link with demand and supply to a great extent. The busier the carriers are, the less space available and the higher the cost. Think about demand itself – depending on your location and where you are shipping, seasonality can drive demand.
The Weather or Climatic Change
Weather is a very strong determining factor. Freight rate, whether air, sea or road can also be influenced by weather conditions.
Weather conditions like rain on rainy seasons or the harmattan haze in December threaten the aircraft cause flight disruptions and usually cause rate hikes in air freight rates. Same applies to Sea freight, although tranship delays, disaster en-route may also have an effect on freight rates.
The exchange rate affects freight rate directly whenever there is a change in the dollar rate. There is usually a directly proportional increase in prices of goods and services. For example, at the time of this post, 1 dollar to naira stand at N365.50, whereas on Monday 3rd February 2020, it stood at N361.50.
Definitely, the freight rates would not be the same as the fluctuation in the price of the dollar also affect the market generally.
Read Also: 5 Most common Import Documents Required for Customs Clearance
Cost of Fuelling & Scarcity
This factor is a major reason why freight might fluctuate. As fuel price increases, the airlines and shipping lines also adjust rates of freight to correspond with profit margins. There could be a sharp hike in freight rate especially when there are scarcity of fuel.
Although the government play major roles in freight, some policies adopted may affect how freight fluctuates. For example, VAT. Value Added Tax which used to be 5% was increased to 7.5% effective from January 2020.
Apart from tax, increase in the Lagos State Landing Fee and packing fee are yet another determinant factor to the upward movement of the freight rates.
Are these factors really uncontrollable?
Well, the above-listed factors are not controllable as they depend on external forces such as the act of God, the Government, International effects and so on.
Factors that drive shipping freight rates
As a company, there are factors that drive shipping freight rates. To get the BowaGate Global freight rates and Clearance fees, there is however some information we would need.
You would be required to provide us with the location, distance, dimension, weight & sizes, freight mode, handling mode, service needed and freight type. These also help us determine the rate and service charges.
Why Choose Us As Your Agent
Bowa-Gate Global Ltd is a logistic company with a team of highly motivated and experienced professionals who provide quality cargo handling, freight forwarding and clearing services in Nigeria.
We provide adequate logistics and clearing services for our numerous clients. Our operational systems include handling of all relevant documents, freight forwarding, customs clearance, warehousing and transportation of consignment on behalf of the consignee. Proper monitoring of all inward and outward bound consignments is ensured by our efficient and dedicated staff.
We answered some pressing questions for you here
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