For much of 2015, analysts and investors heard endless woes from leading shipping lines about falling containers freight rates. To be clear, this is the amount of money the container shipping line receives per TEU it transports; not the cost of acquiring, using, or maintaining the shipping container itself.
The freight rate charged by shipping lines should not be confused with the lease or rental dues paid to the container leasing company for the use of the shipping container. Please allow me to explain the difference …
A Basic Ocean Freight transportation rate is the cost the container shipping line associates with moving your cargo. This is priced according to a number of contributing factors, such as the origin and destination, as well as the cargo type; i.e. dry cargo container or reefer container.
A Basic Ocean Freight transportation rate is the cost the container shipping line associates with moving your cargo.
In addition to the Basic Ocean Freight rate, there are a number of mandatory surcharges applied to cover cost items or services that are either pass-through charges (from terminals for example), or considered to be beyond the basic ocean transport services. Expect that these surcharges will be applicable to every container shipment transported by the shipping line.
The three most common surcharges levied against container shipments are:
- Bunker Adjustment Factor. A charge to account for the fluctuations in bunker costs
- Terminal Handling Charges. Fees based on the cost of handling the container in the terminals, including loading and discharging containers to/from the vessel.
- Documentation Fees. A service whereby all necessary transport documents are provided for clients at the origin and destination.
On the other hand, the shipping container lease or rental cost is the fee charged by container leasing companies like Pacific Tycoon, for allowing clients the extended use of their shipping containers to transport cargo to domestic or international destinations.
Generally speaking, but not in all instances, the shipping container lease covers delivery and pickup, as well as cleaning and maintenance to the unit. the client only needs worry about filling and emptying their contents.
The “Basic Ocean Freight Rate” charged by shipping lines is independent of the cost associated with leasing a shipping container.
The intention of writing this article was to explain that the falling prices for the “Basic Ocean Freight Rate” charged by shipping lines is independent of the costs associated with the lease of shipping containers, and therefore in no way affects the performance of the returns on shipping container investments. They are two separate costs for shipping clients.