There are 4 major types of freight transportation available for shippers to use in the world of freight shipping. The primary ones are by ground (road), rail, ocean, and air. Although these are the main categories of freight transportation, each method has their own processes that differ from one another.
The freight market consists of shipowners, charterers and brokers. They use 4 types of contractual arrangements: the voyage charter, the contract of affreightment, the time charter and the bareboat charter.
Shipowners contract to carry cargo for an agreed price per tonne while the charter market hires out ships for a certain period. A charter is legally agreed upon in a charter-party in which the terms of the deal are clearly set out.
The pricing of a cargo ship’s services is dependent on the forces of supply and demand, but the factors underlying them are perhaps more complicated than is the case with most other industries.
As with all forms of transport, the demand for shipping is derived from the demand for the commodities carried, which is itself affected by the competition of substitute goods.
Ships on any particular route are competing against other carriers on the same route, vessels serving alternative supply areas, air transport and, in coastal services, inland transport.
The main factors in determining the freight rate are: mode of transportation, weight, size, distance, points of pickup and delivery, and the actual goods being shipped.
In general, the more freight you transport, the cheaper it is. This is an important factor in the rate charged to people or companies shipping freight.