On April 23th the standard for container freight was announced by Shanghai Municipal Development and Reform Commission and four other ministries to abolish fuel surcharge and nighttime operation charges set by container yards in shanghai and reduce turn-over rate of containers to various extent at port areas.
Overstrained logistics businesses, faced with various cost, are experiencing great diffi culty keeping up an appearance, while meager profi t is being lost. Lately the author interviewed some people from the long-distance transportation, shipment industry and container transportation consecutively with an aim to fi nd out the exact transportation cost and what the logistics industry really looks like.


Cost of long distance trucking
Though skyrocketing oil price is the most direct factor behind the high cost, other expenses also take a large proportion of the cost for load carriers.
The reporter randomly interviewed a driver of long distance transportation in a logistics park near Shibalidian on the Southeastern 4th Ring Road in Beijing.
According to the driver, who is engaged in transportation between Guangzhou and Beijing, it takes nearly ten days for a round trip. When asked about the expenses and cost of each transportation, he told the reporter, “A lot of money is required to pass highway in every province from Guangzhou to Beijing. Another major cost is fuel. I spend about 13,000 or 14.000 yuan on fuel and toll from Guangzhou to Beijing.”
“I can tell you the approximate number I make each time, though profits change every time. Take a deal for example. Customer pays us 15,000 yuan. We spend about 7,000 yuan on fuel. T en 13,000 or 14,000 yuan will be spent on fuel and toll altogether, which leaves us 1,000 or 2,000 yuan to make.” T e driver reckoned profi ts while complaining to me about the high oil prices. He said 400 yuan more would be spent on a trip from Guangzhou to Beijing with price rise of fuel this time, which is a lot to him.
As I know the cost of domestic long distance transportation mainly includes: fuel surcharge, highway toll fees, parking fee, driver’s pay, vehicle’s depreciation cost, cost of purchasing new vehicles etc. Besides, there are other small expenses, such as loading fee and unloading fee.
All these expenses are included in cost. Besides a lump sum payment by customers, remaining number is borne by carriers, which leaves carriers little profi ts.
Cost of port transportation
As far as I know, there are many expense items in port transportation. Normally carriers need to take these expenses into consideration when reckoning cost.
Take Tianjin for example. The mai charges at port in clude: the charge for r ports on arrival is 200 to 400 yuan; servi charge ranges from 50 to 80 yuan; docume fee is 20 to 50 yuan; port seal (leak) charg is 15 to 50 yuan; terminal handling charg is 120 to 180 yuan. At container yards, 40 yuan will be charged for a twenty-feet equi alent unit loaded at production site and 65 yuan for a forty-feet equivalent uni. If carg are not loaded on ship, container detentio charge, demurrage charges, and shut-out trans-ship, etc. will be charged.
Among the above expenses, charges o arrival set by container yards are fi xed. Tran portation cost is determined by distance. Mo need to be taken into consideration to calcula overall cost. Diesel fuel is the major cost single trip, which is under the influences every oil price rise. Highway toll fees and tol are the second biggest cost next to diesel fue However, there are also some big invisible cos such as fi nes for over-high cubic container.
What’s more, there are potential ris involved in the trucking business. Carrie need to consider the loss for accidents, whic may cost ten to 20,000 yuan, or even hundre thousand yuan, another huge invisible cost. I case of an accident, towing fee, appraisal fe etc. will also be charged.
Another cost is road administratio charge and traffi c police fi nes, which also a fect overall cost and profi ts a lot.
Cost for container gate-in
Liu Dou, a trucking boss in Tianji port, examined various cost to carry carg from Tianjin to Shijiazhuang.
According to the current prices to carr cargo from Tianjin to Shijiazhuang, loadin a container costs about 3,900 yuan or 4,00 yuan (empty containers are first carried t factories after being picked at port; then the will be loaded and at last delivered back t Tianjin port).
In the process, 2,000 yuan of oil co and highway toll, 650 yuan of container yar fees, 200 yuan of fi nes, 200 yuan of driver wages, 150 yuan of insurance premium, an 160 yuan of tax will be paid.
“All of these are direct cost. Diff ere trucks have diff erent gasoline consumptio The horsepower of my trucks is small an the vehicles scarely run in the highway. T company’s other cost also has to be covere In this way, 300 to 400 yuan is allowed t each car, which makes less than 300 yuan
net profits a day. The current market prices are very clear.” Mr. Liu reckoned his cost during the transportation and admitted that profi ts of trucking businesses are rather low.
“As for cost at port, the 650 yuan just mentioned includes arrival report fee of 400 yuan, service charge of 80 yuan; port seal fee of 20 yuan etc. Different container yards charge diff erently.”
Besides the above mentioned cost, overall cost also includes the cost of deducing or delaying order, operation, building rent, phone fee, and administration etc. although different carriers have diff erent cost on these items, they are almost the same. In this way, carriers make no more than 200 yuan for each container. However, if there are some accidents, cost will rise significantly.
Liu Dou, who was currently in Tianjin, didn’t think the expense reduction in Shanghai would be of much help to the business. After all customers will get the information immediately and lower the payment to the carrier accordingly. Customers only check fuel expenses and container yard expenses with carriers, but not others, such as fines, insurance premium, cost for car repairs etc. Then carriers’ profits are further diminished.
Highly competitive shipping industry
The shipping industry is under high pressure from the severe competitions between carriers.
Zhang Cheng, a ship carrier in Dalian who has been engaged in the business for many years told the reporter about the status quo of highly competitive shipping industry.
“Ocean freight business has its own industrial characteristics. I think the industry itself does not calculate the cost. Instead cargo interests do so.”
Mr. Zhang’s remark was out of consideration given to the highly competitive industry. According to him, prices in the whole industry go with the market fl uctuation. What is snatched by businesses is steady supply of goods. Only when one achieves certain scale, can the business be competitive, which requires a long time engaged in the business with stable customer resouces.
“T e shipping businesses will not stop as long as money loss is not great. If we stop the business, we will suff er the loss more.”
A ship with more than ten thousand tons costs 40 to 50 million yuan at most. Most investments on ships in the industry are through loans, which requires regular repayment. What’s more, there are nearly 30 sailors on board every day. To stabilized the crew, we must pay them even if the business is suspended, or they will be recruited by other carriers. It will be hard to recruit people. Besides, seaweed will grow on the bottom of a ship if it stops for a long time, resulting in increased resistance to the ship sailing, which will not only increase costs of oil, but also reduce the speed of the ship.
Periods of fl uctuations in the shipping industry tend to be short. If a carrier suspends business during recession, he/she will soon meet recession again when he/she restart the business in a good time. T erefore, normally companies will not reduce businesses during recession without careful consideration, which is decided by the industrial characteristics. Businesses will be lost if operation suspends. A long-term stable customer is of vital importance to a company’s development.
“The shipping market is rather transparent. Price changes no more than three yuan per ton. Every company follows market instead of their own cost. Cost has no say in market.” Zhang Cheng thought the shipping industry goes under the direction of market and the cost couldn’t decicle the price decide pricing.
Cost composition along the logistics chain
Zhang Cheng game an example to illustrate all the steps and cost items in a complete transportation.
Take freight from Chaoyang City, Liaoning Province to Guangzhou for example. Cargo fi rst will be transported from Chaoyang to Jinzhou Port, where cargo will containers will be gated in and loaded on board once certain amount accumulated. Then the containers will be shipped to Guangzhou, and then picked by companies to factories or project sites.
Overall cost during the whole process includes: first, trucking cost from Chaoyang City to Jinzhou, chosen from quotations of logistics companies, which is quite fair; second, container gate-in fees per ton, which is relatively stable and regulated once a year; third, shipment and transportation cost; fourth, cost at Guangzhou Port and truck fees to take cargo from the port to factories.
Of all these cost, truck fees, as well as shipping freight fees are fl oating with a large proportion.
Of course, there are “sub-cost in each process. For example, in the first step, trucking fees include truck investment costs, drivers’ wages, cost of oil, tolls, time cost, and taxes. Cost at Jinzhou Port includes dock workers wages, crane investment, crane depreciation costs, electricity fees, site hiring costs, and the cost of shipment.
In the second step, shipping cost include ship investment, sailors’ wages, board wages, time cost, pie rage, fuel cost, and taxes.
It will cost the same in Guangzhou Port as in Jinzhou Port; and the same to transport cargo from the port to factories as trucking cost in the fi rst step.
“Cost depends on cargo. For example, the prices to carry cotton and steel are diff erent. Super-long and super-wide goods will cost more to transport.” Zhang Cheng told the reporter, “I can’t tell you more about the exact cost, because I have to consider too many other things as well, such as wages of my employees. Do I pay them daily or monthly? Transportation period varies, so pay depends on each case.”
(Author: China Enterprise News)