Determinants of European freight rates: The role of market power and trade imbalance

•Inward freight rates are 23% higher than for outward ones.•Outward freight rates tend to be higher for indirect services than for long journeys.•Surcharges, and in particular, the ancillary charges, seem to be used as one of the main revenue-makers.

This paper investigates the determinants of freight rates between six European countries and 47 partners. We show that the inward freight rates are, on average, 23% higher than for outward ones, indicating that the cost of repositioning empty containers is mainly carried by European importers. Moreover, we have broken down the freight rates into basic ocean freight and surcharges in order to analyze the impact of each explanatory variable on these two components. It appears that basic ocean freight depends mainly on factors that define the structure of shipping lanes, while surcharges are more time sensitive.