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Is Liner Shipping Supply Fixed?

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  • Mike Fusillo

    (PIERS Director of Maritime Research, 33 Washington Street, 3rd floor, Newark, NJ, USA.)

Abstract

Liner shipping firms have long argued that the task of providing adequate service to shippers while earning reasonable rates of return on capital requires at least some form of limited antitrust immunity. Carriers contend that because scheduling requirements unique to liner shipping firms constrains their ability to adjust capacity to meet market conditions, liner shipping capacity is essentially fixed in the short term while demand is variable. And because individual firms have incentive to minimise unit costs by maximising capacity utilisation on every voyage, the threat of destructive price wars looms large. Consequently, carriers have advocated that governments leave them free to form collusive arrangements called conferences in which members are free to meet to discuss and fix prices. But how rigid is liner shipping capacity? Because of a lack of useable data on prices and capacity, this question has never been resolved empirically. But recently, new data have become available from public and industry sources that permit researchers to look more deeply into this issue. In this paper, those data are used to estimate a partial adjustment, distributed lag supply function for liner shipping services in US trade lanes. The results reveal that, on the major US import trade lanes, liner shipping supply curve exhibits more flexibility than the ‘stylised facts’ of the industry would suggest. Maritime Economics & Logistics (2004) 6, 220–235. doi:10.1057/palgrave.mel.9100110

Suggested Citation

  • Mike Fusillo, 2004. "Is Liner Shipping Supply Fixed?," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 6(3), pages 220-235, September.
    • Handle: RePEc:pal:marecl:v:6:y:2004:i:3:p:220-235
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    Citations

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    Cited by:

    1. Mary R. Brooks, 2011. "Competition and Regulation in Maritime Transport," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 37, Edward Elgar Publishing.
    2. Ziaul Haque Munim & Hans-Joachim Schramm, 2017. "Forecasting container shipping freight rates for the Far East – Northern Europe trade lane," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 19(1), pages 106-125, March.
    3. Peter Nielsen & Liping Jiang & Niels Gorm Malý Rytter & Gang Chen, 2014. "An investigation of forecast horizon and observation fit's influence on an econometric rate forecast model in the liner shipping industry," Maritime Policy & Management, Taylor & Francis Journals, vol. 41(7), pages 667-682, December.
    4. Wu, Wei-Ming, 2009. "An approach for measuring the optimal fleet capacity: Evidence from the container shipping lines in Taiwan," International Journal of Production Economics, Elsevier, vol. 122(1), pages 118-126, November.
    5. Michael Fung, 2014. "Ocean Carriers’ Collusion Under Antitrust Immunity: Evidence of Asymmetric Pass-Through," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 45(1), pages 59-77, August.
    6. Wu, Wei-Ming & Lin, Jenn-Rong, 2015. "Productivity growth, scale economies, ship size economies and technical progress for the container shipping industry in Taiwan," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 73(C), pages 1-16.
    7. Saeed, Naima & Nguyen, Su & Cullinane, Kevin & Gekara, Victor & Chhetri, Prem, 2023. "Forecasting container freight rates using the Prophet forecasting method," Transport Policy, Elsevier, vol. 133(C), pages 86-107.
    8. André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), 2011. "A Handbook of Transport Economics," Books, Edward Elgar Publishing, number 12679.
    9. Goh, Tian & Zhong, Sheng & Ang, B.W. & Su, Bin & Ng, Szu Hui & Chai, Kah-Hin, 2021. "Driving factors of changes in international maritime energy consumption: Microdata evidence 2014–2017," Energy Policy, Elsevier, vol. 154(C).
    10. Svetlana Avdasheva & Svetlana Golovanova & Gyuzel Yusupova, 2019. "Advance freight rate announcements (GRI) in liner shipping: European and Russian regulatory settlements compared," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 21(2), pages 192-206, June.

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