In China, the freight forwarding industries consist of 3 types of forwarders,

·       Freight forwarders that are subordinates of major shipping lines, such as China COSCO Shipping Corporation with COSCO, Ceva Logistics with CMA, LF Logistics with MSK, to name a few.

·       Large-scale booking agents collaborate strategically with shipping lines to optimize space distribution. Their main responsibilities involve distributing space to markets, enabling shipping lines to utilize capacity efficiently and take on cost-effective goods. However, their preference is to work with direct shippers and small to medium forwarders that have significant shipping needs.

·       Small and medium forwarders account for an estimated 80% of the market and complement the large-scale forwarders. It's important to note that "small/medium" doesn't imply they can’t offer competitive rates; in fact, their independence from shipping lines allows them greater flexibility to compare options and secure the best rates for you.

In the complex world of logistics, the issue of fluctuating shipping rates often perplexes shippers and consignees alike. Several key factors contribute to the variability in shipping costs, leading to lower rates at times. This post explores three primary reasons for why these lower shipping rates consistently emerge.

• Diverse Booking Resources

The methods by which bookings are made can significantly influence shipping rates. Some shippers book directly with shipping lines, while others utilize the services of booking agents. Each party involved has the discretion to adjust shipping costs to meet specific shipment requirements. To ensure competitiveness, shipping lines and agents may offer different rates based on demand, capacity, or urgency. Furthermore, savvy shippers or consignees may even negotiate lower shipping costs, leveraging their relationships and volume commitments.

• Contract Logistics

Major shipping lines often enter into contractual agreements with large corporations, such as Haier or Huawei, offering preferential rates for substantial shipping projects. However, these contracts typically come with stipulations, such as using specific shipping titles or ensuring that the products shipped match those outlined in the agreement. It is crucial for the parties involved to consider the correct shipper or consignee name when issuing either the Master Bill of Lading (B/L) or House B/L. Compliance with these contractual requirements not only safeguards the agreed rates but also streamlines the shipping process.

• Competitive Market Dynamics

The shipping industry is characterized by intense competition among freight forwarders, many of whom drop their rates to attract new clients. This strategy can create a temporary market advantage but often leads to adjustments in pricing once the client is secured. In times of rapid market fluctuations, these forwarders are well-positioned to capitalize on changes, thus exploiting gaps in pricing to their benefit.

Conclusion

The factors influencing shipping rates are multifaceted, involving dynamics of booking methods, contractual agreements, and competitive strategies. By understanding these variables, shippers and consignees can navigate the complexities of shipping costs, ensuring they make informed decisions that optimize their logistics operations. Throughout these fluctuations, it remains essential for all stakeholders to remain vigilant and proactive in their shipping strategies.

Here are a couple of things you may consider doing.

Credit check:

Like many countries we have our public credit checking platforms, which are Iqicha or Qichacha, where we can check information such registration date and year, registration location, business scope, or most importantly, if there are any ongoing lawsuits or legal disputes.

Market Research:

Please refer to the above answer of how to identify the category of your forwarder, allowing you to adjust your management strategy accordingly.

Service Quality:

Service quality directly affects the efficiency of the logistics process, the cost of each shipment, and the safety of goods delivery.

There are a couple of metrics that you can refer to evaluate your potential forwarder,

• The efficiency of the logistics process.

• Engaging a knowledgeable logistics forwarder can help you mitigate the risk of unnecessary expenses.

• The multiple steps in this logistics process require effective communication and rational selection of downstream service partners.

• Free Detention

The time the containers spend outside the terminal. Measured between picking them up at the port when they’re full and returning them to the port or a depot when they’re empty. For an importer, this is usually the time to unpack.

• Free Demurrage

The time the filled containers spend inside the terminal. This is measured from when they are offloaded from the vessel or train until they are picked up at the port (gated out).