Port Economics

Port Economics

Port Economics is the study of the economic decisions (and their consequences) of the users

and providers of port services. A port is an “engine” for economic development by providing

employment, worker incomes, business earnings, and taxes for its region. The book provides

a detailed discussion of types of carriers that use ports, the operation of cargo and passenger

ports, as well as the operation of such specific ports as Hong Kong, Hamburg, Le Havre,

Savannah, Miami, and Panama.

Port Economics is the first contemporary textbook of its kind. It enhances our understand￾ing of port economics by

● classifying port users and suppliers of port services in the context of economic demand

and supply curves;

● denoting that the demand for port services has two prices, the price paid to the port by

the users and the price (or actual and opportunity costs) incurred by port user carriers,

shippers, and passengers;

● presenting economic theories of carriers, shippers, and passengers.

The numerous up-to-date references will be of benefit to students and researchers of the

economics of the shipping trade; to government officials in developing port and shipping

policies; and to port operators in understanding the port-choice selection process by

shipping lines and other carriers.

Wayne K. Talley is the Frederick W. Beazley Professor of Economics and Executive

Director of the Maritime Institute at Old Dominion University, Norfolk, Virginia, USA.

Port Economics

Wayne K. Talley

First published 2009

by Routledge

2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN

Simultaneously published in the USA and Canada

by Routledge

270 Madison Avenue, New York, NY 10016

Routledge is an imprint of the Taylor & Francis Group,

an informa business

© 2009 Wayne K. Talley

All rights reserved. No part of this book may be reprinted or reproduced

or utilized in any form or by any electronic, mechanical, or other means,

now known or hereafter invented, including photocopying and recording,

or in any information storage or retrieval system, without permission in

writing from the publishers.

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication Data

Talley, Wayne Kenneth.

Port economics / Wayne K. Talley.

p. cm.

1. Harbors–Economic aspects. I. Title.

HE551.T35 2009

387.1–dc22

2008041761

ISBN13: 978-0-415-77721-6 (hbk)

ISBN13: 978-0-415-77722-3 (pbk)

ISBN13: 978-0-203-88006-7 (ebk)

ISBN10: 0-415-77721-6 (hbk)

ISBN10: 0-415-77722-4 (pbk)

ISBN10: 0-203-88006-4 (ebk)

This edition published in the Taylor & Francis e-Library, 2009.

To purchase your own copy of this or any of Taylor & Francis or Routledge’s

collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.

ISBN 0-203-88006-4 Master e-book ISBN

To my grandchildren,

Luke Kenneth Perkins

Emily Dawn Talley

London Mark Perkins

Anna Carter Talley

Contents

List of figures xiii

List of tables xv

List of abbreviations xvi

Preface xix

1 Introduction 1

What is a port? 1

Vessel port calls: networks 2

Vessel port calls: world, country, and vessel type 4

Ports and economic development 7

Containerization 9

World container ports 10

Summary 11

2 Port users and service providers 13

Introduction 13

Users: carriers 13

Container shipping lines 13

Short sea shipping carriers 15

Ferry carriers 17

Cruise lines 18

Railroads 18

Truck carriers 21

Carrier demand for port service 22

Users: shippers and passengers 23

Shippers 23

Passengers 24

Service providers 26

Port operator 26

Other service providers 28

Summary 31

3 Ports in operation 34

Introduction 34

A container port 34

The flow of port containers 35

Port design 36

Port equipment 38

Port services 43

A cruise port 44

Port design 44

Port equipment 45

Specific ports in operation 45

Port of Hong Kong 45

Port of Hamburg 46

Port of Le Havre 47

Port of Savannah 47

Port of Miami 48

Ports of Panama 48

Summary 49

4 Carriers 51

Introduction 51

Resources 51

Operating options 52

Output 53

Cost 54

Short-run cost 54

Long-run cost 55

Long-run cost: multiple outputs 59

Pricing 60

Carrier demand in port 62

Ports and ship size 63

Port choice and shipping lines 65

Summary 66

5 Shippers 69

Introduction 69

Business logistics management 69

Transportation 70

Inventory 70

Order processing 70

Warehousing 71

Production scheduling 72

Materials handling 72

Packaging 73

viii Contents

Location 73

Supply chain management 73

A supply chain network 73

Supply chain activities 75

Supply chain integration 76

Transportation demand by shippers 77

Shipper demand in port 79

Port choice and shippers 80

Port choice and supply chains 80

Supply chain shipping capacity 81

Summary 82

6 Passengers 85

Introduction 85

Passenger time prices 85

Transportation demand by ferry passengers 87

Transportation choice and ferry passengers 89

Passenger demand in port 90

Port choice and passengers 90

Summary 92

7 Port operator operating options, production, and cost 94

Introduction 94

Operating options 94

Resource utilization and congestion 95

Production and capacity 96

Cost 97

Short-run cost 98

Long-run cost 99

Long-run cost: multiple throughputs 101

Types of costs 102

Costing port throughput 103

Resource costing 103

Cost-center costing 104

Cost-equation costing 104

Port output measures 105

Summary 106

8 Port operator operating objectives, prices, and investment 110

Introduction 110

Effectiveness operating objectives 110

Port prices 112

Port prices in practice 112

Fully allocated cost port prices 113

Contents ix

Marginal-cost port prices 114

Port prices and external costs 115

Port congestion prices 116

The incidence of port prices 117

Port taxes versus user fees 118

Port investment 119

Port investment decisions 120

Port investment, costs, and prices 121

Port investment and macroeconomic effects 123

Summary 123

9 Port governance and agglomeration 126

Introduction 126

Port governance 126

Port privatization 127

Port governance in practice 128

European ports 128

Asian ports 129

North American ports 130

Agglomeration 131

Ports and cities 132

Summary 133

10 Port performance and competition 136

Introduction 136

Performance evaluation: a single port perspective 136

Throughput performance evaluation 137

Indicator performance evaluation 137

Evaluation in practice 139

Performance evaluation: a multiport perspective 139

Port competition 140

Interport competition 140

Intraport competition 142

Port competition, economic rent, and contestability 142

Port competitiveness 143

Summary 144

11 Port dockworkers 147

Introduction 147

International unions 147

EU port services directive 148

U.S. dockworkers 150

Employment 150

Wages 151

x Contents

Dockworker versus seafarer wages 152

Dockworker versus railroad wages 153

Dockworker versus truck driver wages 154

Dockworker protests 155

Dockworkers in Hong Kong and Germany 155

Summary 156

12 Port pollution 159

Introduction 159

Water pollution 159

Ballast water 159

Dredging 161

Waste disposal 162

Antifouling paints 162

Oil spillage 163

Air pollution 164

Vessels 164

Vehicles 166

Noise and aesthetic pollution 168

Summary 168

13 Port security and safety 171

Introduction 171

Maritime security incidents: economic effects 171

The international ship and port security code 172

U.S. port security 173

Maritime cargo security initiatives 173

The SAFE Port Act 175

Detection 176

Response and recovery 177

Port security finance and cost 179

EU port security 180

Port safety 181

Port accidents 181

Port state control 181

Port safe working conditions 182

Summary 183

14 Ports in the future 187

Introduction 187

Container port challenges 187

Port congestion 187

Size of containerships 188

Size of containers 189

Contents xi

Panama Canal and vessel port calls 190

Panama Canal expansion 190

Panama Canal competitors 190

Railroads 190

Suez Canal 191

Arctic sea route 191

Port information and communication technologies 192

Port pollution 193

Port logistics activities 194

Port security 195

Port cooperation 195

LNG marine terminals 196

Summary 196

Index 201

xii Contents

Figures

1.1 Constant frequency port-call OD network 3

1.2 Variable frequency port-call OD network 3

1.3 Mainline-feeder network 4

1.4 Mainline-mainline network 5

1.5 Mainline-feeder and mainline-mainline networks 5

2.1 Carrier demand for port service 22

2.2 Shipper demand for port service 25

2.3 Passenger demand for port service 27

2.4 Port operator supply of port service 29

2.5 Other service-provider supply of port services 30

3.1 Feedering and main container ports in two trading regions 37

3.2 Ship-to-shore gantry crane 38

3.3 Straddle carrier 39

3.4 Top loader 40

3.5 Yard gantry crane 41

3.6 Automated guided vehicle (AGV) 42

3.7 Cassette AGV that is double-stacked loaded onto a cassette

and transported by an AGV 42

3.8 Automatic stacking crane 43

4.1 Carrier short-run total, fixed, and variable costs 55

4.2 Carrier short-run unit and marginal costs 56

4.3a Carrier long-run costs 56

4.3b Carrier long-run unit and marginal costs 57

4.4a Carrier economies of scale 57

4.4b Carrier diseconomies of scale 58

4.4c Carrier constant returns to scale 58

4.5 Carrier economies and diseconomies of and

constant returns to scale 59

4.6 Carrier short-run profits and losses 61

4.7 Carrier demand for port services at full prices 63

4.8 Economies of ship size at sea 64

4.9 Diseconomies of ship size in port 64

5.1 Inventory cost and the quality level of transportation service 71

5.2 Transportation costs and the number of warehouse locations 72

5.3 A supply chain network 74

5.4 Shipper transportation demand at full prices 78

5.5 Full price, delivery time, and shipper transportation demand 78

5.6 Shipper demand for port services at full prices 79

5.7 Shipper supply chains 81

6.1 Passenger transportation demand at full prices 87

6.2 Full price, trip time, and passenger transportation demand 88

6.3 Full price, value of passenger in-transit time, and passenger

transportation demand 89

6.4 Passenger demand for port services at full prices 91

7.1 Port throughput and labor 97

7.2a Port operator short-run costs 98

7.2b Port operator short-run unit and marginal costs 99

7.3a Port operator long-run costs 100

7.3b Port operator long-run unit and marginal costs 100

7.4 Port constant returns to scale 101

7A.1 Minimization of port cost for a single port throughput 108

7A.2 Minimization of port cost for several port throughputs 108

7A.3 Port operator long-run costs 109

8.1 Marginal cost pricing 115

8.2a Market for port services, price inelastic demand,

and price incidence 117

8.2b Market for port services, price elastic demand,

and price incidence 118

8.3 Net present value for port investment 121

8.4 Port investment, costs, and prices 122

xiv Figures