Ocean freight is a widely used modality for transporting goods and food, where transport time does not have to be very fast and low costs are important. There is a distinction between "short sea", over short distances within the same continent, and intercontinental "deep sea"/"ocean freight".
The vast majority of sea freight is shipped by container (full containers FCL and part loads LCL) on large container ships of large shipping companies. There are roughly a dozen shipping companies that dominate the global market (the main ones: MSC - Mediterranean Shipping Company, APM-Maersk, CMA-CGM, COSCO, Hapag-Lloyd, ONE, Evergreen, Hyundai, Yang Ming).
Sea freight buying is mainly determined by volume. In general, the more volume you have to ship, the better the price. This is anticipated by freight forwarders, agents and Non Vessel Operating Common Carrier (NVOCC). These do not own ships, but provide transport by using ships owned by shipping companies. Because they can bundle volume, they can often buy competitively. Another advantage of such logistics service providers is that they relieve you of the paperwork and arrangements surrounding sea freight.
So depending on what a shipper has to transport, how much, and where to, the question is whether it is better to negotiate directly with shipping companies or to run it through middlemen. And then the question: which ones fit you best?
Ocean freight rates fluctuate a lot throughout the year due to seasonal supply and demand, surcharges, fluctuations in fuel prices, and currency fluctuations (ocean freight is often in dollars, while local port charges and pre- & post-shipment are in local currencies). It is usually not beneficial to request ocean freight rates with a long validity period, as parties hedge against the fluctuations with price buffers. If there is a lot of supply, the price goes up and shippers run the risk that their cargo will "roll over" and only come along one sailing later than planned.
Over several years, there is often also a surge in supply and demand (new, larger ships) that causes longer-term price fluctuations. In sea freight, for most shippers, a combined procurement and management approach is recommended, with a limited number of shipping companies or agents that complement each other well, but also keep each other sharp in rates. That way, shippers pay a fair market price. A TMS can often provide cost and time savings.
Want to learn more about optimising or managing transport? We tell you more in our transport guide!
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