The Bulk Carrier Maximum Optimal Ship Size

Eliamin Kassembe,Zhao Gang

doi:10.5539/ijbm.v8n4p44

Abstract

The main objective of this paper is to investigate the economical limit for the ships’ increase in size. Ship size isone factor out of many that affect the investors in the shipping business. The paper seeks to reassess the validityof well-established theoretical frameworks, which support the concept of depending on the increase in size ofships prompted by economies of scale. The investigation was conducted by use of quantitative methods wheremathematical modeling and simulations were used to analyze the relationships of the key variables. Computersoftware like MS Excel 2010 was used to simulate and generate graphs, values and trends.The empirical results of this work support the theory of economies of scale that can be enjoyed by operating theoptimal ship sizes. Optimality of ships, change linearly with changes in voyage length. The central and novelcontribution of this paper is about the existence of a threshold point where optimal ship sizes reflex theeconomical maxima. For the dry bulk sector the maximum optimal ship size determined as 340,000 dwt.

Highlights

The available literature (Stopford, 2009; ICS, 2008; Kassembe, 2011) indicate that investment in ships is a capital intensive business, and requires a good know-how on the effective strategies that can help investors to stay put in the business
This work confirms that the ship unit cost decrease with the increase of ship size for some time, and that the changes in unit cost drive the growth of ship sizes
The vessel size related with the minimum unit cost is regarded as the optimal ship size from which the owner enjoys the minimum shipping unit costs

Summary

Introduction

The available literature (Stopford, 2009; ICS, 2008; Kassembe, 2011) indicate that investment in ships is a capital intensive business, and requires a good know-how on the effective strategies that can help investors to stay put in the business. One of those strategies is by operating bigger ships where investors can benefit from the economic concept known as, ‘economies of scale’. Taking into consideration the above deficiency, this paper intends to work out the economical limit of ships’ increase in size.

Mathematical Modeling

The Optimal Vessel Size Model

Models’ Constant Values

Conclusion