What Are The Factors That Affect Ocean Freight Rates?

At a time when global trade is booming, shipping, as the main mode of transportation in international trade, is responsible for the cross-border flow of a large amount of goods. Shipping accounts for more than 80% of the world's international trade transportation volume, and its freight fluctuations directly affect the supply chain costs and profit margins of enterprises. In 2024, the fluctuation range of global shipping freight reached 47%, a record high in the past decade. In 2025, affected by the continued tension in the Red Sea, the deepening of carbon neutrality policies and the popularization of smart ship technology, the composition of shipping freight showed a "dynamically complex" feature. As a professional freight forwarder with 15 years of experience in the industry, Jiaxing Heyuan Supply Chain Co.,Ltd.  systematically analyzes the core influencing factors of shipping freight based on the operating data of 23 major ports in the world, and provides professional decision-making support for enterprises to formulate logistics strategies.

1.Transportation distance
Transportation distance is a basic and intuitive factor affecting ocean freight. Generally speaking, the longer the transportation distance, the higher the cost of fuel, manpower, and ship wear and tear, and accordingly, the ocean freight will increase. This is because during long-distance voyages, ships not only consume a lot of fuel to maintain power, but also the cost of crew salary and ship maintenance during the voyage will increase as the voyage time increases. In addition, long-distance transportation may also face more unforeseen risks, such as bad weather, pirate threats, etc. These potential risks will also be taken into account in the freight considerations.

 

2. Basic pricing mechanism: FAK and contract freight
Sea freight is composed of two major pricing systems:
FAK (Freight All Kinds): spot market freight, which fluctuates in real time with supply and demand, accounting for 70% of the transportation volume of small and medium-sized customers.
Contract freight (CSA): long-term agreement price, usually bound to annual cargo volume (such as 100 TEU per month), can get a 15%-30% discount, but need to bear the risk of dumping containers.
Heyuan Supply freight monitoring system captures the FAK and CSA price difference data of 12 major global routes in real time to help companies lock in the best booking window.

 

3. Supply and demand relationship: the underlying logic of the battle for space
Supply-side indicators
Idle capacity ratio: In July 2024, the global container ship idle rate reached 6.2% (Alphaliner data), higher than the 5-year average of 4.1%.
New ship delivery volume: 3.5 million TEUs are expected to be delivered in 2024, accounting for 18% of the existing capacity, which will intensify price competition.
Demand-driven
Manufacturing PMI: When China's PMI is >50 for three consecutive months, European freight rates usually rise by more than 20%.

 

4. Fuel cost: IFO 380 and low sulfur surcharge (LSS)
Fuel price transmission formula:
Freight = base rate + (IFO price × fuel consumption coefficient) + LSS + EBS
Impact of IMO 2020: The price of very low sulfur fuel oil (VLSFO) is 200-300 US dollars/ton higher than that of high sulfur fuel oil (HSFO). Shipping companies pass on costs through LSS (low sulfur surcharge), accounting for about 12%-18% of freight rates.
JXHY fuel hedging solution helps customers lock in LSS rate fluctuations in the next 6 months, with a cost reduction of up to 9%.

 

5.Port and canal fees: hidden cost black hole

 

 

6. Seasonal factors: holiday tide and agricultural product cycle
Q4 Christmas season: freight rates on US West Coast routes from September to November are usually 40% higher than Q2;
South American agricultural product season: Brazilian soybean exports surge from March to May each year, and the space premium on the South American East Coast route is 25%;
Ramadan effect: the volume of Middle East routes increased by 30% and freight rates increased by 15% in the two weeks before the Islamic fasting month of Ramadan.

 

7. Geopolitics and black swan events
Red Sea crisis: Houthi armed forces attacked merchant ships in December 2023, and freight rates on Shanghai-Europe routes soared 270% in a single week;
Panama Canal drought: traffic volume was reduced by 36% in 2024, and the surcharge for 40-foot containers rose to $5,000;
Strike risk: The strike of the German Port Union caused a 60% drop in the turnover efficiency of the Port of Hamburg and a surge in port detention costs.

 

8.Cargo attributes: size/weight/dangerous goods surcharge

9. Exchange rate fluctuations: the butterfly effect of the US dollar index
Sea freight costs are settled in US dollars. For every 1% depreciation of the RMB against the US dollar, the cost of Chinese exporters increases by about 1.2%. During the Fed's interest rate hike cycle in 2024, Heyuan Supply's forward exchange settlement service helps customers avoid exchange rate risks, saving more than 6 million yuan in financial costs annually.

 

10. Industry alliances and capacity regulation
The three major shipping alliances control 80% of the world's capacity (2M/THE/OCEAN), and artificially reduce supply through blank sailings: 21% of voyages on the Asia-Europe route will be canceled in Q2 2024, pushing up freight rates by 34%; alliance members share space, and it is 50% more difficult for small freight forwarders to obtain direct passenger space.

 

11. Green shipping cost transfer (CII/EEDI)
The Carbon Intensity Index (CII) of the International Maritime Organization (IMO) requires: by 2030, ship carbon emissions must be reduced by 40%, and old ships must pay carbon taxes (about $50/TEU); the rental of dual-fuel LNG-powered ships is 30% higher than that of traditional tankers, and this part of the cost will be passed on to shippers through GSC (green shipping surcharge).

 

Summary
Sea freight is the product of dynamic game. Only companies that master real-time data and risk hedging tools can control the cost initiative. JXHY International Freight's AI-based "Smart Transport" system integrates real-time data of 230 ports around the world and historical fluctuation models of 5,000 routes to provide customers with:

Freight rate forecast: predict the price trend of major routes 3 months in advance, with an accuracy rate of >82%;
Cost optimization: through mixed/transit port switching/contract combination, the average annual logistics cost is reduced by 18%-25%;
Risk control: customized insurance solutions cover war insurance/demurrage/cargo damage claims.
Get exclusive freight analysis report now: https://www.jxhy-cargo.com/contact-us

 

Keywords: factors affecting sea freight, international freight forwarding, JXHY freight, space supply and demand analysis, fuel surcharge, port congestion cost