Economies and Diseconomies of Scale in Container Shipping

Like many forms of transportation, container shipping benefits from economies of scale in maritime shipping, transshipment and inland transportation. The rationale of maritime container shipping companies to have larger ships becomes obvious when the benefits, in terms of lower costs per TEU, increase with the capacity of ships. There is thus a powerful trend to increase the size of ships, but this may lead to diseconomies to other components of container shipping. This is particularly the case for transshipment, notably at port terminals. The growth in capacity comes with increasing problems to cope with large amounts of containers to be transshipped over short periods of time as shipping companies want to reduce their port time as much as possible. Larger cranes and larger quantities of land for container operations, namely temporary warehousing, may become prohibitive, triggering diseconomies of scale to be assumed by port authorities and terminal operators. The same principle applies to inland transportation where congestion, such as more trucks converging towards terminal gates, leads to diseconomies.

Because of technical innovations and functional changes in inland transportation, such as using rail instead of trucking to move containers from or to terminals, it is unclear what is the effective capacity beyond which diseconomies of scale are achieved.

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