Shipping Costs

Do Rising Interest Rates Affect Your Shipping Costs?

When it comes to dealing in exports and imports, there are a variety of factors that can impact your shipping costs. Freight shipping can be impacted by multiple global events, all of which can impact your costs.

As interest rates rise, your business can be negatively impacted, particularly if you have various loans for inventory. The longer those goods remain unsold, the more it costs your business in terms of interest. Inflation and rising interest rates also impact shipping costs.

Here are how rising interest rates can impact your shipping costs, especially as you import or export your goods using freight shipping.

Shipping Companies Are Highly Leveraged

Many shipping companies are highly leveraged, with long-term loans priced at a spread against LIBOR (London Interbank Offer Rate). If there are increase in LIBOR, then higher interest rates could negatively impact the cash balances of these companies.

Therefore, you may find that shipping costs go up when interest rates increase to address the impact on their cash balances. Essentially, their higher costs associated with their loans are being passed onto the customer. Therefore, it might be prudent to consider alternative shipping means, depending on the goods you are shipping.

The Impact of Slow Steaming

Another impact on shipping costs related to interest rates is the economics involved in slow steaming. During its transportation across the ocean in a ship, a cargo is essentially in storage. The time that cargo spends in transit is an inventory cost, which also can be driven by interest rate.

Ships may use the practice of slowing down their ships to conserve fuel, but that means your goods are in storage even longer.

As a business owner shipping goods for import or export, it is important to determine the most cost-effective speed for moving your goods, based on the bunker costs, freight costs, cargo costs, and interest rate. Therefore, while your interest rates may not unilaterally impact your shipping costs, they can indirectly impact them.

With all this in mind, it is important to recognize that mistakes at the customs level could negatively impact your shipments, adding delays that increase your shipping costs. Some of these mistakes could include not having visibility in your chain of custody or a lack of description, which could cause delays with customs.

When it comes to shipping your freight internationally, you need to work with a company that can help you to address customs efficiently and making sure all the details regarding paperwork are handled. Our experienced team has over 30 years of experience as customs brokers dealing with international freight. Call us today for help addressing your customs needs.

Atlanta Customs Brokers is one of the oldest and most trusted customs brokerage and shipping firms in Atlanta. Established in 1985, our company has been a fixture in and around the Atlanta airport and Savannah port for more than 31 years. We enjoy working with our international partners and enjoy what we do. If you are a first-time importer or exporter or a large corporation, we can handle your needs.