Port Competition Revisited

Port competition is an important topic in transport economics. This is due not only to the large volumes of goods involved in port throughput – a direct measure of a port’s competitive strength – but also to derived effects in terms of employment and investment. Strikingly, the existing literature on the subject tends to regard ports as rather homogeneous entities. In practice, it is increasingly apparent that ports are far from homogeneous environments. This paper elaborates a methodology for analyzing relationships between port operators. Moreover, competition unfolds not only between ports, but also, primarily even, between individual production companies and service providers located in those ports or making use of them, and increasingly also between entire supply chains. The chain element that contributes most to making the chain the cheapest possible, will have the highest chance of being included. This can be derived from a preliminary analysis of port selection criteria, where cost turns out to be the most important criterion. Next to that, also other factors are shown to be possibly important, depending on the conditions and the actor. These factors will have an impact on the generalized cost, and it is shown how this cost can be decomposed in basically a time and a distance component. In order to quantify that cost, it is important to have an overview of the objectives that the different actors aim at, and of the instruments they can use to make the objectives materialize, which are therefore summarized in the paper. The last section of the paper assesses the role of a number of factors which affect port competition. The most striking ones are the changes in world trade, and market structure changes on the side of shipping companies and terminal operating companies.