Need for port pricing overhaul

The solution that is argued to be most feasible is the internalisation of externalities, relating to port pricing.

Currently, the port pricing system is favourable to mega-ships as most tariffs are proportional to the gross tonnage of ships.

Some ports use a maximum tariff that kicks in around ship capacity of around 5,000 TEU, which represents a blatant form of cross-subsidisation. Despite, ports making larger costs for the largest ships, but these often pay less (in relative terms) than smaller ships.

As well as this terminal handling charges often consist of a price per move, with a higher price for full containers and import/export containers; lower prices for empties and transhipment.

Therefore, terminals are also said to make more costs for handling mega-ships but do not charge more to the mega-ships they handle.

It is argued that changes could be made to this to help the industry. In simple terms; ships that generate more costs should pay more.

In ports that could mean that there is a harbour maintenance fund based on costs incurred, such as the largest ships need more dredging so also need to pay for it and a charge for congestion, both at the quay side and at the terminal gate.

This could mean more ship size-related charges, bonuses related to productivity, discounts for unpopular berth windows, charges for delays of ships.

For this to happen there would need to be coordination between ports that are competing with each other, to avoid that public subsidies are used to reduce port tariffs and subsidise mega-ships.

This requires more financial transparency of ports and port authorities to take seriously their public role.

Stopping cross-subsidies to mega-ships could also be in the interest of carriers, as this would mean the end of ship overcapacity induced by continuous new rounds of ever bigger ships.

If carriers start to pay the real costs of mega-ships, upsizing will soon come to end and with it the frantic orders by carriers that do not want to stay behind.

To read Olaf Merk’s blog on the subject in its entirety, go to http://shippingtoday.eu/ or visit https://twitter.com/Shipping_Today