The price of sea freight is determined by a variety of factors that reflect the complexity and variability of the shipping industry. Here are the primary factors influencing sea freight rates:

1. Supply and Demand

• Economic Conditions: Economic booms or recessions in key markets can significantly impact trade volumes and shipping demand. During economic growth, higher consumer demand increases shipping activity.
• Industry Trends: Trends like reshoring or nearshoring manufacturing can shift trade patterns, affecting the demand for certain shipping routes.

2. Fuel Costs

• Bunker Adjustment Factor (BAF): Shipping lines often include a BAF surcharge to cover fluctuations in fuel costs. When fuel prices rise, the BAF increases, leading to higher freight rates.
• Fuel Efficiency: Modern, fuel-efficient ships may have lower operating costs, potentially influencing freight rates.

3. Vessel Size and Type

• Ultra-Large Container Ships (ULCS): These ships, which can carry over 20,000 TEUs (twenty-foot equivalent units), offer economies of scale but require deep-water ports and specialized infrastructure.
• Specialized Vessels: For example, reefer ships (refrigerated vessels) for perishable goods or tankers for liquids. These specialized vessels are typically more expensive due to their tailored features and limited availability.

4. Route and Distance

• Suez and Panama Canals: Usage of these canals incurs toll fees, which can significantly add to shipping costs. Bypassing these canals involves longer routes and higher fuel consumption.
• Piracy and Security Risks: Routes through regions with high piracy rates (e.g., off the coast of Somalia) may require additional security measures, increasing costs.

5. Port Charges and Handling Fees

• Terminal Handling Charges (THC): Fees for loading and unloading containers at ports. These charges can vary based on port infrastructure and efficiency.
• Demurrage and Detention Fees: Charges applied when containers are not picked up or returned within the stipulated free time period at ports.

6. Container Type and Size

• High Cube Containers: These containers offer additional height and may incur different rates compared to standard containers.
• Reefer Containers: Used for temperature-sensitive cargo, these containers are more expensive due to refrigeration equipment and energy costs.

7. Carrier and Service Level

• Service Contracts: Long-term contracts with carriers can offer lower rates compared to spot market rates, which are more volatile.
• Alliances and Partnerships: Shipping alliances (e.g., 2M, Ocean Alliance) can impact rates by controlling capacity and influencing competition.

8. Regulatory and Environmental Factors

• Emissions Regulations: The International Maritime Organization (IMO) mandates reductions in sulfur emissions, leading to the use of cleaner (and more expensive) fuels or the installation of scrubbers on ships.
• Customs Procedures: Complexity and efficiency of customs processes at ports can affect transit times and costs.

9. Currency Exchange Rates

• Contract Currency: Freight rates might be quoted in USD, but operational costs may be in different currencies. Exchange rate fluctuations can thus impact the final costs borne by shippers.
• Hedging Strategies: Some carriers and shippers use financial instruments to hedge against currency risks, which can affect pricing.

10. Market Competition

• Market Share and Pricing Power: Dominant carriers with large market shares can influence pricing. Conversely, intense competition in fragmented markets can drive down rates.
• Overcapacity: Excess shipping capacity can lead to lower freight rates as carriers compete to fill space.

Additional Considerations

Seasonal Variations

• Agricultural Export Seasons: Certain times of the year see increased shipping volumes for agricultural products, influencing demand and rates.
• Holiday Seasons: Periods leading up to major holidays (e.g., Christmas, Chinese New Year) often see spikes in shipping activity.

Trade Policies and Tariffs

• Trade Agreements: Bilateral and multilateral trade agreements can affect shipping volumes and costs.
• Tariffs and Trade Wars: Imposition of tariffs or trade restrictions can disrupt trade flows and affect shipping demand.

Technological Advancements

• Digitalization: The use of technology in booking, tracking, and managing shipping can improve efficiency and reduce costs.
• Automation: Automated ports and advanced logistics systems can lower handling costs and improve turnaround times.

By considering these detailed factors, businesses involved in sea freight can better navigate the complexities of the shipping market and make informed decisions regarding their logistics strategies.