The effects of consolidation and privatization of ports in proximity: A case study of the Kobe and Osaka ports

Abstract

This study simultaneously explores the effects of “consolidation” and “privatization” of ports that are located in proximity to one another. The main benefit of consolidation is assumed to be economies of scale due to the aggregation of container cargo in one port, while that of privatization is cost reduction for port management and operations. We employ a multi-agent simulation model to express interactions among stakeholders, such as a port management body, shipping company, and shipper. The model is applied to a case study for the Kobe and Osaka ports in Japan. We find that consolidation has a larger impact than privatization in terms of cargo volume and total surplus. In particular, if future container cargo increases, consolidation accelerates the increase in cargo volume of the Kobe and Osaka ports. Transshipment cargo receives the largest volume in the case of “consolidation and privatization” when future container demand is increasing. However, the Busan port in South Korea, competitor of the Kobe and Osaka ports for transshipment cargo, would remain dominant even after the consolidation and privatization of the Kobe and Osaka ports, since its vessel frequency would be high in all cases.