Container freight rates and the role of surcharges

This paper demonstrates that the structure of ocean container freight rates has become more complex. A growing number of surcharges are being imposed by the carriers on their customers, surcharges that are not only adding significant extra costs but are highly variable over time. These elements are examined based on a data set of export rates from ports on the Northern European Range that have been compiled from a major global carrier. The paper compares the surcharges to the base rates and discusses some of the implications for shippers who face increasing uncertainty in planning supply chains. Some of the issues for academic research on freight rates is also examined and points to the need to clearly identify what is included in the freight rate data employed. In addition, questions are raised concerning the suitability of many of the variables traditionally used to explain or predict freight rates.

► Surcharges being imposed by container shipping lines add significant extra costs to customers.
► They are shown to be highly variable over time and differ by trade lanes.
► Traditional freight rate correlates are weak.
► Surcharges add considerable uncertainty to customers planning supply chains.