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How can companies ship relatively cheap items for free? Doesn’t shipping cost anything?

Posted July 11, 2018

Free shipping – that is something we always look for when shopping online. And we have to admit that in many cases our goods are actually shipped for free. But how? How can manufacturers send relatively cheap items across the world without charging for shipping? The secret is in the shipping itself – it actually is almost free.

Free shipping is enabled by huge container ships. Image credit: Smiley.toerist via Wikimedia (CC BY-SA 3.0)

You probably have seen these large container ships that literally carry everything we own. They are massive and they are travelling across the globe all the time, loaded with various products. These container ships are quite literally what moves the world. But they are also shipping our goods extremely cheap. One TEU container can be shipped from Los Angeles to Shanghai for just 1,200 USD. You can load around 20 tons into one of these containers, which means that it costs around 6 cents to ship your 1 kg item. In other words, it is almost free.

Ok, it is not free – sellers simply include shipping costs into the price of the product. But those costs are extremely low, because the biggest contemporary container ships can carry an unbelievable amount of TEU containers. In fact, container ships are still growing, which means that there is a potential for shipping costs to go down.

Shipping a container like this across the world costs just around 1200 USD. Image credit: BezumniyChasovshik via Wikimedia)

Container ships, obviously, have pretty sizeable crews. But relative to the ship size, they are minute – 25-40 people crew is usually plentiful for a big container ship. They are also not burning conventional fuel. People tend to think that large ships are using diesel, but it is not the case. They are using heavy fuel oil, which is basically waste of distillation process to make petrol and diesel. It is thick, black and not clean in any way. Environmentalists, obviously, hate shipping for that, but this is unlikely to change.

MSC Oscar is one of the biggest container ships in the world. It can carry 19,224 TEU containers (if they are not fully loaded in terms of weight) and only requires a crew of 30 people. You can imagine that Oscar is quite a profitable tool. Furthermore, it cost only about 140 million USD to build it. And we do mean “only”, because it costs 350 million to build a cargo version of the legendary Boeing 747, which can carry less than a thousandth of what Oscar does routinely.

MSC Oscar is one of the biggest container ships in the world – it can carry more than 19 thousand TEU containers. Image credit: kees torn via Wikimedia (CC BY-SA 2.0)

All of that “Free shipping” comes at a cost though. Shipping is responsible for 18-30 % of global nitrogen oxide emissions, 9 % sulphur oxide and 2.2-5 % of carbon dioxide. In other words, shipping is a significant contributor to climate change. Shipping industry is also increasing acidity of the oceans and spreading invasive species through ballast water. But none of that is going to change, because sending things by ships is simply economical.

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