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- Title
AN ANALYSIS OF COST AND SUPPLY CONDITIONS IN THE LINER SHIPPING INDUSTRY.
- Authors
Davies, J. E.
- Abstract
The article examines the nature of the cost and supply conditions in the liner shipping industry. It is generally regarded that the most salient characteristic of the cost structure of providing scheduled liner services is the high proportion of costs that are fixed and which do not vary with changes in output. Concerning capital intensiveness, it is evident that liner shipping demands a greater financial stake than virtually any other shipping sector. Concerning the actual proportion of fixed to variable costs, it will vary according to the degree of capacity utilisation achieved, though under normal trading conditions in break bulk trades it is generally regarded that around 70% of total short run costs are fixed. Generally, as load factors fall the proportion of fixed costs will rise since less cargo is being handled therefore fewer cargo related costs are being incurred. The significance of this phenomenon of rapidly decreasing average costs is that it puts a premium on utilisation since as load factors increase unit costs fall dramatically. Precisely what breakdown load factors are under normal commercial trading conditions is almost impossible to ascertain as shipping companies rarely divulge such information.
- Subjects
MARITIME shipping; SUPPLY &; demand; COST structure; CAPITAL; OVERHEAD costs
- Publication
Journal of Industrial Economics, 1983, Vol 31, Issue 4, p417
- ISSN
0022-1821
- Publication type
Article
- DOI
10.2307/2098339