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Factors That Affect Shipping Cost

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Factors That Affect Shipping Cost

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Freight shipping is, in most cases, the backbone of international business. The cost of shipping goods through various channels of transportation, mainly air, and sea, is affected by numerous factors as hereby outlined.

Freight shipping is, in most cases, the backbone of international business. The cost of shipping goods through various channels of transportation, mainly air, and sea, is affected by numerous factors as hereby outlined.

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Factors That Affect Shipping Cost

  1. 1. FACTORS THAT AFFECT SHIPPING COST Neal Elbaum NealElbaum.org COST OF FUEL The expense of the rising costs The cost of maritime, land and air transportation is largely affected by the cost of fuel. Freight companies normally tend to raise their shipping tariffs in response to a rise in the cost of fuel and vice versa. This is because the expense of the rising cost of fuel is normally transferred to the merchants. DEMAND FOR FREIGHT SERVICES Affecting the transportation sector The transportation sector is affected by supply and demand dynamics. Shipping companies may opt to charge a premium fee to benefit from the increased demand. On the contrary, a drop in the demand for freight services may lead to shipping companies lowering their charges in order to attract customers from the diminishing market. GEOPOLITICAL DYNAMICS Affecting the international shipping sector Countries that have direct control over shipping routes such as across the Mediterranean can directly affect the shipping costs through political and regulatory influence. Straining of international relations can lead to countries having a frontier to the ocean limit the shipping vessels that can pass their routes. This has a direct effect on shipping companies’ tariffs. THE VOLUME OF GOODS TRANSPORTED Increased charges and fees Shipping companies use tariffs which give them an opportunity to charge their customers fees depending on the volume of cargo to be transported. In most cases, the companies charge a lesser fee in cases of bulk transportation and increase the fees in cases where the items being transported are non-bulk. WEATHER ELEMENTS Air and sea transport routes are affected Adverse weather during winter and summer can lead to blockage of international shipping channels. This has a direct influence on shipping companies’ freight charges. Adverse weather makes the companies charge a premium fee due to the increased risk and need to secure more insurance for freight cargo. N E A L E L B A U M | W W W . N E A L E L B A U M . O R G

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