Why Do Freight Costs Vary per Trade Lane?
The cost of moving freight is not the same across all trade lanes, for a few reasons.
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The cost of shipping 100 cbm of a product from Shenzhen to Los Angeles will likely not cost the same amount as shipping the same 100 cbm of product from Shenzhen to Rotterdam. Reasons for this cost differentiation include:
Supply and Demand
A trade lane’s freight rates are determined by the supply and demand for service on that trade lane. Rates tend to be lower on high-traffic trade lanes where multiple carriers are offering service and need to keep their rates competitive to attract market share. Freight rates tend to be higher on trade lanes where demand for service is low and only a few carriers might be providing service.
GRI (General Rate Increase)
Freight rates will be higher on trade lanes where a GRI has been implemented. GRIs are generally implemented on trade lanes where carrier competition has driven rates too low.
Carriers may apply a PSS (Peak Season Surcharge) to trade lanes during periods of high demand. A PSS can be applied any time of year, but is more common before the fall/winter holidays and before Chinese New Year.
Freight rates may also go up on trade lanes affected by high demand caused by peak season, Chinese New Year, and Golden Week.
Trade lane freight rates could also vary due to conditions at the port, which may be caused by weather, strikes, etc.
Subscribe to Flexport’s market updates to be notified of when a GRI or PSS has been implemented, when port conditions are causing delays or rate increases, and whether you can expect an increase or decrease in rates on your trade lanes.