Revealing the impact of increased tanker size on shipping costs

Abstract

Purpose: The research objectives refer directly to the key in maritime transport problem of cost economies related to the increasing scale (size) of ships. This article reveals the relationship between an increase in tanker size and shipping cost and its various categories. Design/Methodology/Approach: Economies of tanker size are expressed in terms of the elasticity of daily and unit shipping costs relative to vessel size measured in deadweight. Functions of the shipping daily and unit costs concerning the tanker size were derived by regression, while the parameters were estimated with the ordinary least squares’ method. Findings: Elasticity values for daily and unit shipping costs estimated for tankers within the size range (dwt); 25,000 - 300,000. Tanker daily shipping mean elasticity estimates: another operating cost (labor cost included) (0.262), capital costs (0.407), port costs (0.449), fuel costs (0.575). Revealed tanker unit shipping mean elasticity estimates: full operating costs (-0,67), other operating cost (-0.835), capital costs (-0.690), port costs (-0.649), fuel costs (- 0.523). Practical implications: Elaborated models allow one to estimate savings in shipping costs resulting from handling larger tankers in seaports, which in turn is an important factor in terms of the calculation of the effectiveness of port capacity expansion, as well as in the analysis of competition between ports. The models may be used to study the impact of scale in tanker shipping on the remaining transport links (i.e., ports and hinterlands) and in the routing of sea–land supply chains. Originality/Value: The models for daily and unit costs developed here allow calculating the shipping cost for any tanker size.