Economies of scale in container shipping

Seok-Min Lim

Maritime Policy & Management, 1998, vol. 25, issue 4, 361-373

Abstract: Very large container ships are being built with the theoretical justification that they will produce economies of scale. It is clear, however. that the immediate result of the mega-ship buildings is an overtonnaging of the world's major liner routes. As major operators have put newer and bigger ships in the water, they have significantly reduced the slot costs in the container trades to which these ships are assigned. However, operators have not reaped the benefits of those savings because most freight rates have dropped more than the cost reductions. The industry may never make an adequate return if everyone continues investing in new ships to drive costs down while simultaneously pushing rates down. Implenientation of economies of scale can not be a panacea per se. Carriers must find some way to return to profitability. Cooperation between the carricrs is highly desirable.

Date: 1998
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DOI: 10.1080/03088839800000059

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