Why Shipping Costs Fluctuate and How to Save Money

If you are in a business where frequent shipping is involved from one country to another, then you’d always be worried about one thing – constant shipping rate fluctuations. You might wonder why that happens. Why do shipping rates fluctuate so often that one month, the rates are different, and next month, they are completely changed? There are several reasons for that, and in this blog we will discuss them for you. Moreover, we will help you guide how you can save money on these shipping costs so you can save more.

Top Reasons Why Shipping Costs Fluctuate

Some of the reasons that decide the shipping rates, whether they are going to increase or decrease, depend on various  factors, including: 

1. Fuel Prices

Fuel prices, without a doubt, are a big reason for the increase in shipping rates. What happens is that shipping companies often adjust prices according to the costs of fuel, as it directly affects their operating costs. Now, we all know fuel prices aren’t constant. The prices of fuel are affected by various factors, which include global supply and demand, any political disturbance in the oil-producing countries, or incase of natural disasters. 

These factors contribute big to the prices of fuel prices. In 2024, major disruptions were seen in maritime routes. Due to this, the shipping companies were bound to change their routes. Hence, it increased the costs for them due to more usage of fuel. Ultimately, businesses had to see an increase in shipping rates due to this. 

2. Supply and Demand

Another common reason why shipping prices fluctuate is the supply and demand concept. Remember, in economics, the concepts we read that the prices of goods and services are determined by the supply and demand in the market. The same concept applies to the shipping industry, too. There are times and seasons when the demand for specific products gets huge, and fulfilling that demand comes at a cost. 

The vessels and the containers required are more compared to normal shipments. This is why the shipping companies in Dubai and worldwide have increased their prices. Compared to when there is a low demand for shipping, for example, during an off-season. The delivery costs are decreased. In 2024, the LNG rates experienced a significant low demand. Thus, the supply of the LNG was cheaper and costs were way less than they used to be in the peak demand of LNG.

3. Global Instability 

Global instability is another reason that contributed to the increase in shipping rates. The global instability disrupts the regular trade routes and supply and demand chains. Transportation which used to happen smoothly, now when there are global tensions between countries, it isn’t the same anymore. When countries apply sanctions or have conflicts, the shipping companies are bound to reroute their carriers. They go through long routes to avoid any trouble they might face. 

This causes delays in the shipments. When all this happens, it makes the shipping costs go sky rocketed. Moreover, instability between countries causes port closures, customs delays, and restrictions too on certain products and shipments. All this slows down the natural flow of goods between countries and costs big to the shipping companies, which is ultimately seen in the increase in shipping costs.

4. The Human Factor

The labor issues are always there no matter which industry you operate in. The same is true for the shipping industry, and they are another variable that contributed to the increasing prices of shipping costs. In October 2024, major disruptions were seen in the 14 ports on the United State’s East Coast and Gulf of Mexico. Do you know what caused these disruptions? A simple strike by the dockworkers. This isn’t the only strike. There have been many more.

Shipping is an industry where a huge workforce is required to carry out port and shipment responsibilities. Once there is a shortage of the workforce, it becomes a headache for the shipping companies as they have to pay more to hire laborers, and hence, an increase in the costs is seen. Moreover, with different labor unions, more and more strikes are seen, which are causing big to shipping companies in terms of costs. 

Apart from these four reasons, some of the other factors that contribute to shipping price fluctuations include:

• Currency Fluctuations: The shipping payments are made in US dollars. When a country has a weaker currency, the exchange rates affect the shipping prices. What it means is that the buyers and the sellers have to pay more as their currency is weaker and unstable compared to the US dollar.
• Regulatory Changes: The shipping authorities are giving new regulations to make shipping environmentally friendly. These regulations include carbon taxes, less emission of carbon, and compliance for vessels. All these increase the shipping and operational costs for companies, hence increasing the shipping costs.
• Shipping Method: Shipping costs vary depending on the method you are opting for. Sea cargo will cost you less as ships can handle more containers compared to airplanes. However, sea cargo delivery times are weeks and months, depending on where your cargo is going.  Air freight, on the other hand, will cost you big due to faster delivery times. The transit times air cargo provides are 1 to 2 days or a week. 

How to Save Money on Shipping Costs?

There are several ways you can use to save costs on your next shipping. Some of the ways include the following: 

Optimize Cargo Loading

Many times, businesses are not aware of their requirements. They pack small packages into big containers, trucks, and vice versa. It significantly increases your costs as you know the shipping costs based on the size of the container and where your desired destination is, for example, cargo from Dubai to Russia. 

Optimizing cargo loading simply means knowing the best way to pack your goods into the containers or the trucks. Once you are aware of this, you can pay for the space your shipment takes. You can use a Load Calculator. The load calculator and its usage will help you reduce the empty space. You can surely save money on shipping with this first step. 

Here’s how the process works.

• Firstly, you need to decide how your goods will be packed. For example, boxes, crates, etc..
• Next up, measure the size and weight of your goods.
• Always remember to check if your goods need to be palletized (placed on pallets).
• Now, choose the type of transport unit (truck or container) you need.
• Or let the Load Calculator automatically select the best transport unit.
• The Load Calculator will then show you the most space-efficient way to pack everything.

Select Off-Peak Seasons

The best way to save on shipping costs is not to send your shipments during peak seasons. The costs are very high during peak seasons. What you can do is send your shipments earlier, and you can store them in the warehouses at your destination. The storage will cost less compared to sending your shipments during peak seasons as, due to the high deman,d the prices charged by shipping companies are huge. 

You can use Mondays and Fridays for shipping too. The reason is that these days are considered quite shipping days because the warehouses usually restock early every week. Also, they set to prepare for the next weekend. So, its good to send shipments on these days. Overall, the main point is to avoid peak seasons when shipping is in high demand.

Understanding of Shipping Zone

This element is mostly missed by businesses. You need to understand the concept of shipping zones to save freight costs. Shipping zones measure how far your package is traveling by the carriers. If the number of the shipping zone is higher, it would mean you’d have to pay more.  The zone varies from 1 to 8. Zone 1 is the closest to where you send the ship, and Zone 8 is the farthest. 

The ideal goal for you is to reduce the number of shipments going to high areas. You will cut the shipping cost. You can achieve this with various factors. Such as you can also work with companies that have several warehouses in different fields, and help you send from close places and receive cheap and sharp delivery.

Get Discounted Shipping Rates

Lastly, the best option to save costs on shipping is to ask for discounts. Many shipping companies provide excellent discounts irrespective of whether you are shipping one container or thousands of containers. It is obvious for smaller containers, the discount rates will be lower, and for large shipments you will get better discounts. 

Yet, don’t hesitate. Shipping companies, when they see that you want to use their services for the long term, they offer good deals. Moreover, many online businesses save money this way without hurting the quality or speed of delivery. So, its always best to try to negotiate with your shipping partner and check if they offer loyalty or bulk shipping discounts. In the end, lower shipping rates will help you save money over time.

In the end, the shipping rates are bound to increase as various factors are involved that we discussed in this blog. Moreover, more factors will and you’ll see the shipping rates will go massive in upcoming years. What you as a business can do is you can use these above four smart strategies to save money on your shipments. There are many more strategies, too. But its best to start with these to better understand the process.