Container shipping line port choice patterns in East Asia the effects of port affiliation and spatial dependence

Abstract

In the container shipping sector, many shipping lines are investing in ports and terminals. Although the literature generally agrees that shipping lines can benefit financially from such vertical investments, there are conflicting views on the impacts on different stakeholders, with limited empirical evidence nor solid data analysis. In addition to being an important managerial decision for shipping lines and their affiliated ports, this may become a policy issue because public infrastructure is expected to provide equal and fair access to all consumers. This study aims to enhance the understanding of the implications of shipping line-port integration by investigating its effects on the port call choices of shipping lines at the route level. Using data from East Asia, our correlation matrix of port-calls reveals significant spatial dependence in the port call patterns of shipping lines, and complex relationships between ports in a region, which can be substitutable, complementary or no significant relationship. Our spatial probit model estimation further suggests that carriers, whether based in East Asia or elsewhere, prefer to call at affiliated ports that they own either directly or indirectly via their alliance partners. Carriers tend to avoid calling at some ports with significantly overlapping roles on the same route but are likely to call at multiple ports that are less than 1200 km apart. Our findings also indicate that shipping lines prefer ports with adequate infrastructure and that the number of ports called on one route is constrained by the total transport time. We recommend that port authorities and local governments evaluate vertical integration on a case-by-case basis, because vertical integration could help secure some port throughput but nevertheless limit competition. Further studies on the shipping line-port integration's impacts on port handling efficiency and service quality would help policy formation on vertical integration in the maritime sector.