Economies of scale in large containerships: optimal size and geographical implications Kevin Cullinane a, * , Mahim Khanna b a Department of Shipping and Transport Logistics, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong b Maersk (Australia) Pty. Ltd., Australia Abstract In recent years, liner shipping has experienced an explosion in containership size. This is explained by the economies of scale in utilising such ships. This paper presents a model which quanti®es the economies of scale in operating large containerships. A sensitivity analysis is conducted to test the eect of various input scenarios and the results analysed to determine optimal contai- nership size with respect to dierent operational scenarios. Inferences are then drawn concerning the optimal deployment of the existing ¯eet of large containerships, likely future trends in containership size and deployment and the impact these trends will have upon container operations, logistical systems and ports. Ó 2000 Elsevier Science Ltd. All rights reserved. Keywords: Containerisation; Shipping; Liner shipping; Economies of scale 1. Introduction For a long time, ships involved in the carriage of bulk liquid and dry cargoes have dwarfed containerships. By transforming traditional heterogeneous liner cargoes into homogeneous container cargoes, the adoption of the container concept has created a revolution in ports which has permitted liner shipping to bene®t greatly not only from economies of scale in cargo handling but also in ship size. Despite the availability of suitable tech- nology, it is somewhat perplexing why the bene®ts ac- cruing from this second source of economies have never been reaped to the same extent as was the case with the low value bulks. The purpose of this paper is to develop a model which quanti®es the economies of scale in operating large containerships. This facilitates the evaluation of the potential savings in unit cost which are derived from increasing containership size. Section 2 of this paper places the development of this model in context by presenting a brief historical background to trends in container shipping. This is followed in Section 3 by an overview of more recent developments, especially in re- lation to the size of ship employed. Section 4 focuses particular attention on the ongoing rationalisation of the liner shipping sector. Because it is this restructuring of the market that has made the deployment of large containerships in recent years actually viable, this special treatment is justi®ed. Section 5 presents the conceptual form of the model and the assumptions which underpin it. This is followed in Section 6 by a presentation of the results of the model. Section 7 draws some generic conclusions and presents a dierentiated analysis of the implications of these results for liner shipping operators, for load centres and for ports and terminals. 2. Historical background Throughout the 1960s and 1970s, containerisation made enormous inroads into the carriage of traditional break bulk cargoes. Container penetration (de®ned as total container cargo carried as a percentage of contai- nerisable cargo) was estimated at 75% in 1984, with all three major East±West routes (Trans-Paci®c, Trans- Atlantic and Europe±Far East on which the greatest volume of containers are carried) achieving levels of over 95% (Graham and Hughes, 1985). The growth in general cargo globally and the proportion which is containerised is shown in Fig. 1. This ®gure illustrates that virtually all of the growth in the carriage of general cargo accrues to the container trades; as the result of Journal of Transport Geography 8 (2000) 181±195 www.elsevier.com/locate/jtrangeo * Corresponding author. Tel.: +852-2766-7410; fax: +852-2334- 1765. E-mail address: skcull@polyu.edu.hk (K. Cullinane). 0966-6923/00/$ - see front matter Ó 2000 Elsevier Science Ltd. All rights reserved. PII: S 0 9 6 6 - 6 9 2 3 ( 0 0 ) 0 0 0 1 0 - 7