-
ECONOMIES OF SCALE IN CONTAINER SHIP
COSTS William Murray
United States Merchant Marine Acaemy
-
Economies of Scale in the Container Fleet
•How has the fleet changed in the past decade? •What does the
fleet look like today? •How are capital, voyage, and operational
costs influenced by ship size?
-
Changes in Ship Size • Trend is towards larger vessels
• Mega ships have arisen in the past decade
• Records continually being broken
• Cost categories
0
500
1000
1500
2000
2500
3000
3500
4000
1985 1990 1995 2000 2005 2010 2015 2020
Ave
rage
Shi
p Si
ze (T
EU)
Year
Average Size of Container Ships (TEU)
0
5000000
10000000
15000000
20000000
25000000
1985 1990 1995 2000 2005 2010 2015 2020
TEU
Year
Fleet Capacity
Size (TEU) Percentage of Fleet % 2015 Newbuilds % of 2016
Newbuilds13300+ 4.2% 19% 22%
10000-13299 3.8% 8% 10%7500-9999 9.1% 26% 17%5100-7499 9.1% 3%
1%4000-5099 13.5% 3% 3%3000-3999 5.3% 4% 2%2000-2999 13.2% 11%
20%1500-1999 10.8% 11% 15%1000-1499 13.4% 8% 9%
0-999 17.7% 5% 2%
-
Capital Costs
• Trend in nominal costs (larger ships cost more)
• Cost per TEU decrease as vessel size increases
• Diminishing returns
40
60
80
100
120
140
160
180
2005 2007 2009 2011 2013 2015 2017
Cons
truc
tion
Cost
in M
illio
ns o
f USD
Year of Construction
Nominal Construction Cost by Size
5100-7499 7500-9999 10000-13299 13300+
0
50
100
150
200
250
0 5000 10000 15000 20000
Cons
truc
tion
Cost
(in
mill
ions
of U
SD)
Capacity (TEU)
Nominal Cost of Construction
-
Capital Costs
• Trend has flattened out
• Cost per TEU decrease as vessel size increases
• Diminishing returns
5000
7000
9000
11000
13000
15000
17000
19000
2005 2007 2009 2011 2013 2015 2017
Cost
per
TEU
(USD
)
Year of Construction
Average Construction Cost per TEU
5100-7499 7500-9999 10000-13299 13300+
Size Cost/TEU
0-999 $ 23,065.11
1000-1499 $ 20,606.62
1500-1999 $ 19,215.59
2000-2999 $ 16,436.43
3000-3999 $ 16,255.45
4000-5099 $ 14,672.54
5100-7499 $ 13,912.16
7500-9999 $ 11,491.36
10000-13299 $ 11,234.63 13300+ $ 9,298.82
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Voyage Costs
• Fuel consumption
• Corresponding drops in average design speed and horsepower
• Impact of bunker prices and capacity utilization ratio
21
22
23
24
25
26
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Des
ign
Spee
d (k
nots
)
Year of Construction
Change in Design Speed Over Time
5100-7499 7500-9999 10000-13299 13300+ Total
20000
30000
40000
50000
60000
70000
80000
90000
100000
110000
1999 2001 2003 2005 2007 2009 2011 2013 2015
Average Horsepower
5100-7499 7500-9999 10000-13299 13300+ Total
-
Voyage Costs
• Linear relationship between horsepower and fuel
consumption
0
50
100
150
200
250
300
350
400
450
0 20000 40000 60000 80000 100000 120000
Fuel
Con
sum
ptio
n at
Des
ign
Spee
d (m
etric
tons
pe
r day
)
Horsepower
Horsepower vs Fuel Consumption
0
50
100
150
200
250
300
350
400
450
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Fuel
Con
sum
ptio
n (m
etric
tons
per
day
)
Year of Construction
Average Nominal Fuel Consumption
13300+ 10000-13299 7500-9999 5100-7499 Average
-
Voyage Costs • Speed-adjusted fuel consumption comparison
• Recent trend?
0.01
0.015
0.02
0.025
0.03
0.035
0.04
0.045
4000 6000 8000 10000 12000 14000 16000 18000 20000
Tons
of F
uel B
urne
d pe
r TEU
per
day
@ 2
3 kn
ots
Vessel Capacity (TEU)
Tons of Fuel per TEU @ 23 knots
0.015
0.017
0.019
0.021
0.023
0.025
0.027
0.029
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2013 2014 2015Fue
l Con
sum
ptio
n (m
etric
tons
) Per
TEU
@ 2
3 kn
ots
Year of Construction
Marginal Adjusted Fuel Consumption
13300+ 10000-13299 7500-9999 5100-7499 Average
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Operating Costs
• Main categories are crewing, manning, insurance, stores and
lubes, repairs and maintenance
0
2000
4000
6000
8000
10000
12000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
2014 2015
Ope
ratin
g Co
st (U
SD p
er d
ay)
Year
Distribution of Operating Costs
Manning Insurance Stores and Lubes Repairs and Maintenance
Other
-
Operating Costs
• Larger vessels have lower marginal operating costs
• Costs have increased over time
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
Dai
ly O
pera
ting
Cost
per
TEU
Vessel Capacity (TEU)
Daily Operating Cost per TEU
2001 2008 2015
$0.50
$0.70
$0.90
$1.10
$1.30
$1.50
$1.70
$1.90
$2.10
$2.30
2000 2002 2004 2006 2008 2010 2012 2014 2016
Dai
ly O
pera
ting
Cost
per
TEU
(USD
)
Year
Daily Operating Cost
5000 TEU 10000 TEU 15000 TEU
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Conclusion
• Economies of scale exist in all categories, although there may
be a point of diminishing returns
• Greater economic conditions play a large role
• Consider externalities, particularly in regards to routes,
infrastructure, and turn around time
• Trends have persisted over time, but
there has been variability in recent years
• Overcapacity?
From ITF Report “The Impact of Mega-Ships”
-
William Murray [email protected]
912 222 5016
Economies of Scale in container ship costsEconomies of Scale in
the Container FleetChanges in Ship SizeCapital CostsCapital
CostsVoyage CostsVoyage CostsVoyage CostsOperating CostsOperating
CostsConclusionSlide Number 12
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