10. ECONOMICS

10.1 Production Cost

10.1.1 General
10.1.2 Boxes
10.1.3 Containers

10.2 Distribution Costs -Freight

10.2.1 General
10.2.2 Lorry freight
10.2.3 Railroad freight
10.2.4 Sea freight
10.2.5 Air freight

10.1 Production Cost

10.1.1 General

Costs of boxes and containers vary along with the level of cost in the various countries. If the costs are divided into material cost, production cost and overhead and profit, these will vary, but proportionally. The cost of materials and production machinery will be interrelated in the same way. Those proportional costs which are shown below (in percentages) represent an average from high cost countries (industrial countries). In Chapters 5 and 6 there are given some examples of retail prices.

10.1.2 Boxes

Proportional costs will be as follows:

1. HD-Polyethylene.

Cost of material	ca. 50%
Production cost	ca. 20-30%
Overhead and profit	ca. 20-30%

2. Aluminium alloy

Material cost	ca. 55%
Production cost	ca. 25%
Overhead and profit	ca. 20%

3. Wood

Material cost	ca. 70%
Production cost	ca. 20%
Overhead and profit	ca. 10%

The prices of wooden boxes will vary a great deal, depending on which country they are produced. However, it will be no problem calculating the prices if raw material and production costs are adjusted to domestic conditions .

4. Expanded polystyrene/solid fibre board.

The production process for this type of boxes is almost automatic. The costs are as follows:

Cost of raw material	ca. 55%
Production cost	ca. 10%
Overhead and profit	ca. 35%

10.1.3 Containers

1. HD-Polyethylene container for fish and ice (see also Chapter 6).

Insulated with expanded polystyrene foam between inner and outer skin.

Production costs:

Cost of raw material	ca. 60%
Production cost	ca. 10-20%
Overhead and profit	ca. 20-30%

2. Glass reinforced plastic containers (GRP).

Insulated with expanded polystyrene foam between inner and outer skin.

Cost of raw material	ca. 40%
Production cost	ca. 40%
Overhead and profit	ca. 20%

3. Insulated containers for transport by trailer, i.e., 10, 20 and 40 feet.

The container is built with insulation of expanded polystyrene and covered by steel, aluminium or fibreglass.

The prices show small variations and can be estimated as follows:

Insulated for cooling	ca. US$ 275/m³ 1/
Insulated for freezing	ca. US$ 400/m³

1/ Net volume of container

Production costs can be indicated as follows:

Cost of elements	ca. 45%
Production cost	ca. 45%
Overhead and profit	ca. 10%

10.2 Distribution Costs - Freight

10.2.1 General

Internationally there are few fixed freight rates for transportation of fish. Most often special freight agreements are negotiated in almost all types of transportation of fish and these depend on:

• Country and quantity per year
• Possibility of return cargo
• Price competition using same type of transport and using different types of transport
• Requirements for transport time

10.2.2 Lorry freight

The following price example shows estimated transport cost with lorry with a basis in price per 100 kg up to a volume of 3.5 m³:

1 500 km	US$ 0.37/100 kg
2 500 km	US$ 0.50/100 kg
2 800 km	US$ 0.56/100 kg

The prices are for cold-stored and refrigerated container cargo, which are usually 20-50% higher than the rates of general cargo. For full containers the price will be lower. It is shown in the following example:

Full containers, i.e., 2 to 20 ft containers of 10 t with frozen or iced. fish can be transported a distance of:

• approx. 4 500 km for approx. US$ 5 500
• approx. 5 100 km for approx. US$ 6 000

10.2.3 Railroad freight

For railroad freight the prices are based on fully loaded containers with cold-stored or refrigerated fish.

Table 21 Cost structure in railroad freight

As a basis of calculation for the cargo the following can be used:

10 ft - 5 000 kg; 20 ft - 10 000 kg; and 40 ft - 20 000 kg

10.2.4 Sea freight

The following table will give a basis for estimating sea freight: distance in nautical miles (1 842 m):

Table 22 Cost structure in sea freight

In addition the following examples of freight rates:

40 ft cold-storage container equipped with refrig. unit and approx. 20 t of fish products.

10.2.5 Air freight

In the recent years it has become more and more usual to use air freight for transporting fresh fish and shellfish.

However, there are special requirements with regard to minimum weights if one wants to achieve the most favourable rates. As an example freight calculation for fish/seafoods transported from West-Europe to USA are shown:

The minimum price per shipment is US$ 50

Special agreements are most often negotiated with regard to rate, especially for quantities above 100-500 kg. Containers are generally charged at a fixed price per container and weight. Price example from West Europe (US$).

Table 23 Cost structure in air freight