What actually drives container shipping rates
Base rate, BAF, THC, peak season surcharge — what each line on a freight quote means and which ones are negotiable.
The short answer
A container freight quote is a base ocean rate plus a stack of surcharges that often exceed the base rate itself. The base rate moves with vessel supply and demand on your lane; the surcharges track fuel, terminal costs and seasonal congestion. Knowing which is which tells you what is worth negotiating and what is not.
The base rate is a supply and demand number
The ocean base rate reflects how much vessel capacity is chasing how much cargo on your specific trade lane, in your specific direction. Direction matters enormously: the headhaul leg of a trade carries the volume and the backhaul leg is often a fraction of the price, because carriers would rather move an empty box back cheaply than not at all.
This is why rates on the same route can differ by a factor of three depending on which way you are shipping, and why a rate quoted three weeks ago may be meaningless today. Spot rates on major lanes move weekly.
The surcharges, and what each one is for
Surcharges exist so carriers can pass through costs that move independently of the freight market. They are legitimate, but they are also where quotes become hard to compare.
- BAF (Bunker Adjustment Factor) — fuel cost pass-through, recalculated monthly or quarterly against actual bunker prices. Usually a percentage of the base rate.
- THC (Terminal Handling Charge) — the port's cost of moving your container between the vessel and the yard. Charged at both ends, set by the terminal, and effectively fixed.
- PSS (Peak Season Surcharge) — applied when demand outstrips capacity, classically ahead of Chinese New Year and in the pre-Christmas run. Announced with notice and often negotiable on contract volume.
- Documentation and B/L fees — administrative, modest, and typically fixed per shipment rather than per container.
- Congestion and war risk surcharges — event-driven, applied at short notice when a port backs up or a routing becomes hazardous.
What moves the number most
Three variables dominate. Lane and direction set the base. Equipment type changes it materially — a 40ft high cube usually costs only slightly more than a standard 40ft while carrying meaningfully more volume, which is why it is the default choice for light, bulky cargo. Reefer, open top and flat rack all price on a different basis entirely.
Timing is the third. Booking two to three weeks ahead of a sailing generally beats spot booking, and booking into a contract rate beats both if your volume supports it.
Spot versus contract
A spot rate is quoted for a specific shipment and holds for days. A contract rate fixes a price for an agreed volume over a period, usually a year, and protects you when the market spikes.
The trade-off is real: contract holders paid well above spot during the soft market that followed the 2021–22 peak. Contracts are insurance against volatility, not a guarantee of the lowest price. If your volume is steady and predictable, the certainty is usually worth it; if it is lumpy, spot plus a good forwarder relationship often wins.
Reading a quote properly
Ask for an all-in landed figure to a named place, not a port-to-port ocean rate. The gap between the two is where unpleasant surprises live — destination terminal handling, customs entry, delivery order fees, and inland haulage can add materially to a low headline rate.
When comparing two quotes, normalise them to the same Incoterm and the same named destination first. A quote that looks cheaper on the ocean leg frequently is not once both are stated door to door.
Last reviewed by Daniel Okonkwo, Pricing Director at First Base Freight.
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