What a freight rate actually prices

A freight rate is the price of moving cargo capacity from where it is to where the cargo needs to go. It reflects tonne-mile demand set against the tonnage physically available in the loading region, plus the voyage costs the owner has to recover — bunkers, port charges, canal dues and the days the voyage will absorb.

Dry bulk

Dry cargo is quoted either as a voyage rate in dollars per tonne on a named route, or as a daily time charter hire. Owners convert voyage business into a time charter equivalent — voyage revenue less voyage costs, divided by the total voyage days — so a spot fixture can be compared directly against a period deal. Published route assessments from the Baltic Exchange provide the benchmark.

Tankers and Worldscale

Wet freight is usually quoted in Worldscale points. Worldscale publishes a nominal flat rate in dollars per tonne for thousands of route pairs each year; a fixture at WS 100 means the flat rate, WS 150 means 50 per cent above it. The convention lets a single number compare very different voyages, but the dollar outcome depends on that year's flat rate, so year-on-year point comparisons can mislead.

Containers

Box freight is quoted per TEU or FEU on a port-pair basis, split between short-term spot rates and annual or semi-annual contract rates negotiated with shippers and forwarders. Headline rates rarely tell the whole story: bunker adjustment factors, peak season and congestion surcharges, terminal handling and equipment imbalance charges all sit on top. Blank sailings are the main lever carriers use to defend rates when demand softens.

Spot versus contract

Spot exposure captures upside when tonnage tightens and hurts when it loosens; period charters and contracts of affreightment trade that upside for visibility. Most commercial teams run a deliberate mix, and hedge the residual with forward freight agreements that cash-settle against a published index average.

What to watch week to week

  • Fleet deliveries, demolition and the orderbook as a share of the trading fleet.
  • Port congestion and canal restrictions, which remove effective capacity.
  • Bunker prices and the spread between compliant grades.
  • Cargo programmes: iron ore and grain seasons, crude export volumes, retail restocking.
  • Sanctions and rerouting, which lengthen voyages and lift tonne-mile demand.

Continue reading

Track live movements in freight rates and markets, or read the Baltic Dry Index guide and the ship chartering guide.