Bangkok Shipowners and Agent Association

Bangkok Shipowners and Agents Association
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Home News World Shipping News A closer look at economies of scale in 2012 (Intra-Asia trade)
A closer look at economies of scale in 2012 (Intra-Asia trade) PDF Print E-mail
Friday, 10 February 2012 06:34
Shpg Gazette 10/2/12

EARLIER this week in The Container Shipping Manager we looked at whether the supposed cost benefits of operating larger vessels in the market today actually gives shipping lines an economies-of-scale advantage, based on the current time charter market.

The answer we found, based solely on per-unit costs, was yes. But time charter costs are not the only costs that carriers incur when running a service. Naturally, carriers that own their vessels do not even need to consider it at all. But even when they do, the costs they face will vary from trade lane to trade lane.

Today we will examine the question of whether bigger is better for carriers based on the current operating parameters in the Intra-Asia trade. Here we will see if the economies-of-scale advantage continues when the other primary expense is take into account-bunker fuel...

Bunker fuel now accounts for more than half of a carrier's total operating cost on any given trade at present. And with bunker prices so high today, it is absolutely imperative that any discussion on the costs facing carriers in the market includes bunker fuel.

Let's now look at the parameters for our service simulation today, as shown in the table below.

The port rotation for the above Intra-Asia service is as follows:

Busan - Inchon - Qingdao - Hong Kong - Port Klang - Singapore - Busan

The range of vessels we are looking at in today's analysis is based on the same vessel classes we examined in the earlier articles in this series, ranging between 1,100 TEU and 4,250 TEU.

The above calculations are based on the design speed for each vessel class, which factors in the nominal and actual loading capacity of the ships in question. As such, slow steaming has not been taken into account.