The Anatomy of a Freight Rate
Supply Chain Unchained
A 30-year freight pricing expert and former JP Morgan analyst breaks down exactly what goes into a freight rate, why rates are so volatile, and what shippers can do to protect themselves.
Every importer pays a freight rate. Very few understand what is actually inside it. In this episode, Greg sits down with Johnson Leung of Linerlytica, joining from Hong Kong, to break down the anatomy of a container freight rate from the ground up, including what drives rates up, why GRIs do or don’t stick, and the single most important thing a shipper can do to manage freight cost volatility.
Johnson brings a rare perspective, having worked inside a shipping line doing pricing, then spent 20 years as a financial analyst covering container shipping stocks at JP Morgan, hedge funds and US investment banks, before founding Linerlytica, a market intelligence platform tracking over 7,000 vessels and 2,000 liner services globally.
What We Cover
- The four components of a freight rate: terminal handling charges, variable costs (empty repositioning), semi-variable voyage costs (bunker, canal tolls, port authority fees), and fixed costs (vessel depreciation and charter fees)
- Why terminal handling charges are often treated as a separate line item and can sometimes exceed the ocean freight rate itself
- How shipping lines price at the margin, why in a weak market a liner may accept cargo at $300 just to cover empty repositioning, even if voyage cost is not recovered
- What COVID taught shipping lines about price ceilings, and why the ceiling has permanently shifted upward
- How GRIs work, why vessel utilisation is the single most important factor in whether a GRI sticks, and the three intelligence signals shippers can monitor (online spot quotations, vessel utilisation data, and weekly capacity on sailing schedules)
- Why freight rates are not predictable by nature, but that does not mean shippers should stop trying to predict the direction
- The case for fixed-rate annual contracts as the best strategy for managing volatility, and why the industry’s move toward index-linked contracts is counterproductive for shippers
- What Linerlytica does and who uses it, from ocean procurement managers and freight forwarders to liner pricing teams and shipping stock traders
Guest
Johnson Leung
Co-founder, Linerlytica (linerlytica.com)
Former pricing manager, Maersk. Former analyst, JP Morgan, hedge funds and US investment banks. 30 years in container shipping and financial markets
“Freight rates are not predictable. But when you have no choice, you still need to maximise your level of intelligence about what is happening, otherwise you fail in your job.”
Johnson Leung, Co-founder, Linerlytica
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