How Ocean Shipping Works

The role of ships in trade

Ships move most of the world’s goods by volume. The reason is simple: a vessel can carry an enormous amount of cargo for a relatively small amount of fuel and crew per unit of cargo. That makes sea transport the economical way to move goods across oceans, as long as the shipment can tolerate a slow trip.

Ocean shipping includes several quite different businesses. Understanding the main types helps explain the schedules, prices and delays you read about.

Main vessel types

• Container ships carry standardized steel boxes stacked in rows and layers, for manufactured goods, food, clothing and a wide range of other products. Capacity is counted in TEU (twenty-foot equivalent units); a 40-foot container counts as two TEU.
• Bulk carriers carry unpacked cargo such as grain, coal, iron ore and cement in large holds. This is the domain of bulk cargo.
• Tankers carry liquids, including crude oil, refined products, chemicals and liquefied gases, in specialized tanks.
• Roll-on/roll-off (ro-ro) ships carry vehicles that are driven on and off.
• General cargo and project vessels carry items that do not fit in containers, such as oversized machinery.

Liner and tramp services

Two operating styles are worth knowing.

Liner shipping runs on fixed routes and published schedules, much like a bus line, calling at the same series of ports on a regular rotation. Container shipping is mostly liner service. A shipper books space on a scheduled sailing, and several shippers share the same vessel.

Tramp shipping has no fixed route. A vessel is hired, often by the voyage or for a period, to carry whatever cargo is needed between whichever ports are required. Bulk and tanker cargoes often move this way.

Container lines often combine services into alliances and share vessels on certain routes. Because a ship calls at several ports in sequence, a delay at one port can ripple through the rest of its rotation.

How a container shipment moves by sea

1. Booking. The shipper or a freight forwarder reserves space with a shipping line for a specific sailing, giving details of the cargo, origin and destination.
2. Container pickup and loading. An empty container is delivered to the shipper’s site, filled, and sealed. Shipments that fill a container are called FCL (full container load). Smaller shipments that share a container with others are called LCL (less than container load) and require consolidation and deconsolidation.
3. Trucking or rail to the port. The loaded container travels to the departure terminal.
4. Export clearance and documents. Paperwork is submitted. A key document is the bill of lading, which serves as a receipt, a contract of carriage and, in many cases, a document of title. Other shipping documents may include commercial invoices and packing lists.
5. Terminal and loading. The container waits in the yard, then is lifted aboard by a crane according to a stowage plan that balances the ship and groups containers by destination. The container terminal is where much of this planning happens.
6. Sea voyage. The vessel sails, sometimes stopping at intermediate ports. Time at sea can range from a few days on short routes to a few weeks between distant regions.
7. Arrival and discharge. The container is unloaded at the destination port and enters the yard.
8. Import clearance. Customs clearance, duty payment and any inspections must be completed before release.
9. Final delivery. A truck or train carries the container to the consignee, who unloads it and returns the empty box.

Why transit time is more than the voyage

The days at sea are only part of the schedule. Add the time to move cargo to the port, wait for cut-off times, sit in the yard before loading, transfer between ships if the route requires it, wait for customs, and travel inland at the other end. In total, door-to-door time can be noticeably longer than the sailing time alone. This is why lead times from overseas suppliers are often counted in weeks rather than days.

What drives cost

Ocean rates vary with:

• distance and the trade lane;
• the balance between supply of ship space and demand for it;
• fuel costs and environmental rules;
• container type and weight;
• port charges, terminal handling and surcharges;
• seasonal demand patterns, including the busy period before major retail seasons.

Rates can change quickly. Container lines use a mix of long-term contracts and spot market rates, and the two can diverge when the market is tight.

What can go wrong

Several factors can delay or complicate sea transport. Port congestion can hold vessels at anchor. Severe weather can force diversions. Narrow waterways, known as maritime chokepoints, can be blocked or restricted. Labor disruptions, equipment shortages (such as too few empty containers in the right place) and inspection backlogs also play a role. Because of these risks, schedule reliability, the share of vessels arriving on time, is a closely watched measure, and it has varied considerably over time.

Strengths and limits

Strengths: very low cost per unit of cargo, huge capacity, the ability to carry nearly any kind of goods, and a mature global network of ports and services.

Limits: slow transit, dependence on ports and inland connections, exposure to weather and congestion, and extra inventory needed to cover the long lead time. Sea freight also does not provide door-to-door service on its own and is nearly always combined with trucks or trains, as the section on intermodal transport describes.

For businesses, the practical question is usually not whether ships are cheap, but whether the savings are worth the time and the planning needed to manage a long pipeline of goods in transit.