Liner Shipping Industry Research Articles

Investigating the Co-Movement and Asymmetric Relationships of Oil Prices on the Shipping Stock Returns: Evidence from Three Shipping-Flagged Companies from Germany, South Korea, and Taiwan.

In the last 2 years, there has been a significant upswing in oil prices, leading to a decline in economic activity and demand. This trend holds substantial implications for the global economy, particularly within the emerging business landscape. Among the influential risk factors impacting the returns of shipping stocks, none looms larger than the volatility in oil prices. Yet, only a limited number of studies have explored the complex relationship between oil price shocks and the dynamics of the liner shipping industry, with specific focus on uncertainty linkages and potential diversification strategies. This study aims to investigate the co-movements and asymmetric associations between oil prices (specifically, West Texas Intermediate and Brent) and the stock returns of three prominent shipping companies from Germany, South Korea, and Taiwan. The results unequivocally highlight the indispensable role of oil prices in shaping both short-term and long-term shipping stock returns. In addition, the research underscores the statistical significance of exchange rates and interest rates in influencing these returns, with their effects varying across different time horizons. Notably, shipping stock prices exhibit heightened sensitivity to positive movements in oil prices, while exchange rates and interest rates exert contrasting impacts, one being positive and the other negative. These findings collectively illuminate the profound influence of market sentiment regarding crucial economic indicators within the global shipping sector.

Service-oriented container slot allocation policy under stochastic demand

The liner shipping industry plays a pivotal role in global cargo transportation, catering to both contract and spot shippers. Proper capacity allocation between these shippers is vital for maintaining service quality and improving revenue. This research investigates the service-oriented container slot allocation problem under stochastic demand, aiming to maximize total freight revenue while providing adequate service levels to contract shippers for sustaining their market loyalty. We use the fill rate (i.e., the proportion of satisfied demand) as a metric for service level and formulate the research problem as a stochastic linear programming model. To solve this model, we convert it into a multi-objective attainability problem by setting a target for total revenue, and apply Blackwell’s Approachability Theorem to theoretically determine the feasibility of any given revenue and service level requirements. Leveraging these insights, we devise near-optimal policies to guide the slot allocation decision under each demand scenario. Numerical experiments demonstrate that our approach outperforms the benchmark policies in the literature. Furthermore, it can also achieve near-optimal performance closely resembling the sampling average approximation (SAA) solution while significantly reducing the computational time.

Taking maritime shipping agreements out of the box

ABSTRACT Since its beginnings in the 19th century, the liner shipping industry has shown specific peculiarities characterized by close collaboration between sea carriers. This cooperation has materialized through various types of inter-firm agreements that have been exempted from the key principles of competition law. Recently, strong criticism has emerged against strategic alliances and related agreements that rule a concentrated market where operators are strongly interrelated and increasingly integrated. However, the maritime management literature so far has given little attention to the concrete provisions of these agreements, which still appear as ‘black boxes.’ To fill this gap, we collected 61 enforced cooperative agreements registered with the U.S. Federal Maritime Commission from 1973 to 2020 using a three-way comparison through legal, linguistic, and business lenses of the differences between older and newer types of agreements. We underline the key temporal evolutions of these contracts and show how ocean carriers have incorporated new legal constraints and strategic needs driven by structural market changes toward greater logistics integration.

Digital transformation of maritime logistics: Exploring trends in the liner shipping segment

Rapidly evolving needs of shippers, rising competition, advancement in digital technologies and a quest to increase cost and operational efficiencies are all driving the digital transformation of maritime logistics. However, in contrast to other industries such as media, telecom, banking, retail and even other traffic modes, the often family-controlled and network-centric liner shipping industry has historically been conservative in adopting innovations; hence, it is still far behind in embracing digitalization. Based on semi-structured interviews with senior executives of liner shipping companies, this study explores the current digital maturity levels, the opportunities provided by digitalization and the underlying challenges that hinder its implementation in the liner shipping segment within the larger maritime logistics industry and identifies the essential leading strategies of digitalization in this segment. The digital maturity categories applied to liner shipping provide an opportunity for practitioners in this industry to evaluate their business functions’ digital maturity levels. Furthermore, based on interview data, digital transformation for the maritime logistics industry is defined, as well as 9 major barriers and 19 different pathways to digital transformation are identified. Understanding the key challenges and success factors in the industry is a key to approaching digitalization problems and developing a healthy digital transformation process.

Vessel deployment with limited information: Distributionally robust chance constrained models

This paper studies the fundamental vessel deployment problem in the liner shipping industry, which decides the numbers of mixed-type ships and their sailing frequencies on fixed routes to provide sufficient vessel capacity for fulfilling stochastic shipping demands with high probability. In reality, it is usually difficult (if not impossible) to acquire a precise joint distribution of shipping demands, as they may fluctuate heavily due to the fast-changing economic environment or unpredictable events. To address this challenge, we leverage recent advances in distributionally robust optimization and propose distribution-free robust joint chance constrained models. In the first model, we only assume support, mean as well as lower-order dispersion information of the shipping demands and provide high-quality solutions via a sequential convex optimization algorithm. Comparing with existing literature that chiefly studies individual chance constraints based on concentration inequalities and the union bound, our approach yields solutions that are less conservative and less vulnerable to the magnitude of demand dispersion. We also extend to a data-driven model based on the Wasserstein distance, which suits well in situations where limited historical demand samples are available. Our distributionally robust chance constrained models could serve as a baseline model for vessel deployment, into which we believe additional practical constraints could be incorporated seamlessly.

Alternative approaches to measuring concentration in liner shipping

Shipping has always had a special relationship with competition law and economics. Even if special competition law regimes for the shipping industry continue to exist, most countries nowadays accept the notion that shipping markets should be more competitive. Competition authorities monitor this in a more or less regular fashion, with various market concentration indexes. The liner shipping industry is peculiar in its widespread cooperation schemes between carriers, in the form of vessel sharing agreements, also known as consortia. Carriers engage in cooperation with all of their major competitors in a system of consortia that is highly interlinked. This brings considerable risks of abuse of market power. Yet, the system of inter-linked consortia has never been systematically mapped, nor do competition authorities appear to monitor them. This article addresses this gap, by proposing alternative indicators, in addition to the traditional industry concentration indexes such as the Herfindahl–Hirschman Index (HHI), that take the reality of consortia into account. Here, five possible alternative indicators are considered: the market share of consortia and independent operators; the share of consortia exceeding market share thresholds; the industry market concentration of consortia; a modified HHI that takes consortia into account; and interlinkages between consortia. We analyse the current state of concentration of liner shipping on the basis of these indicators using a new and unique database that contains deployed ship capacity of container carriers on all of their liner services. Based on this dataset we provide an overview of differences in industry concentration across world regions and developments over time. Traditional indicators show an increase in industry concentration. For example, over the trade corridors to and from Northern Europe, the HHI scores in 2006 ranged from 604 to 2463, and from 1164 to 4882 in 2021. The alternative criteria show additional industry concentration. We show that in 2021, 704 out of more than 1500 agreements among carrier consortia had a combined market share of at least 30%, and 102 of them had a combined market share of at least 50%. We also observe that in 2021, the carriers active in alliances operated 85% of the consortia capacity. Although carriers that are in the same alliance operate most of these consortia, it is also noteworthy that carriers that are not in the same alliance operate a considerable part (24%) of the consortia. Our calculations of modified Herfindahl–Hirschman Index (MHHI)indexes that take consortia into account show that industry concentration is higher when consortia are taken into account: for example on the trade corridor Northern Europe-North America East Coast, the MHHI has reached the threshold of 2500 points, despite an HHI score of around 1500. In the conclusion of the article, we put forward ways in which these alternative indicators could be used by competition authorities.

Q-method and its application in clustering Hong Kong shippers' selection criteria of ocean carriers

Despite recent geopolitical tensions across nations, the liner shipping industry still plays a pivotal role in supporting international trade by ensuring low-cost transportation services. However, given the increased intensity of mergers and acquisitions, the formation of new shipping alliances and general perception of the commoditisation of ocean carriers pose numerous risks in how shipping line operations interact with shippers' needs. Previous research has identified several factors regarding ocean carrier selection criteria from the shippers' perspective, mainly focusing on regional markets. Nonetheless, knowledge of how shippers address these factors is limited. In this study, through a mix of qualitative and quantitative analyses, Q-methodology is applied to investigate shippers' choice behaviour regarding ocean carriers in Hong Kong. The results of our analysis show the emergence of three unique clusters of shippers with different needs when considering the ocean carrier selection process. The three clusters are ‘reliability and flexibility of service achiever’, ‘long-term shipper-carrier relationship builder’, and ‘customer service and cost-saving seeker’. These findings may assist in enabling shipping lines to enhance their competitiveness by analysing and selecting the most suitable strategy for serving customers and identifying operational and marketing areas that need to be restructured or strengthened.

Schedule reliability in liner shipping timetable design: A convex programming approach

Container liner shipping is the primary mode of moving manufactured products across continents. Partly due to inherent uncertainties at sea and ports, the liner shipping industry has long had a notorious reputation of schedule delays and unreliable on-time performance. This paper formulates a new approach to incorporate schedule reliability targets in liner shipping timetable design, to balance bunker consumption, time taken for the voyage, and schedule delays. We first model a surrogate problem using a copositive program through a moment decomposition approach and solve it as a convex semidefinite programming relaxation. We next incorporate schedule reliability targets implicitly by exploiting the optimality condition of this surrogate model.We use this approach to analyze the trade-offs between the bunker consumption and the schedule reliability targets for each port call. Furthermore, we derive the optimal speed of the vessel in each leg of the schedule to control for total bunker consumption. Surprisingly, the analytical analysis shows that, if a shipping line has the freedom to choose its preferred berthing times at all ports, it is optimal to set design sailing speeds equal at all legs to maximize schedule reliability.We validate our model using data from a Daily Maersk service, and demonstrate that our schedule can achieve an even higher schedule reliability than the innovative Daily Maersk service schedule, which attained more than 98% reliability in practice, with 11.4% lower bunker consumption. In comparison with a common schedule design heuristic, our model can design service schedules that improve the reliability performance by at least five percentage points, consuming the same amount of bunker. For the same reliability target (of 80%) in schedule design, our model can help reduce bunker consumption by about 11.6% for an 11-week schedule. The savings in bunker consumption can be much more substantial when an ocean carrier aims for higher schedule reliability.

Maximization of container slot booking profits for carriers in the liner shipping industry

In the liner shipping industry, if a shipper wants to transport its cargo by container ships, it first needs to contact a carrier to book container slots based on the estimated transportation demand. However, one problem in the booking process is that the actual demand is uncertain, resulting in mismatch between the required demand and the booked quantity. To address this issue, this study develops a Newsvendor model to find the optimal order quantity of container slots for the shipper. In addition, uncertainties in the quantity of container slots booking made by the shipper might cause revenue loss to the carrier and low utilization of ship capacity in the daily operations of liner shipping services. Therefore, this study suggests that the shipper should pay reservation fee when booking container slots. This study also aims to find the maximum profit for the carrier under the optimal order quantity of the shipper. In sensitive analysis, how different prices per container slot offered by the carrier would influence the reservation fee, the optimal order quantity of the shipper, and the expected profit of the carrier are explored and discussed. This study can help to manage and promote the online container booking systems in the liner shipping industry.

An integrated optimization method for tactical-level planning in liner shipping with heterogeneous ship fleet and environmental considerations

The maritime transportation flows and container demand have been increasing over time, although the COVID-19 pandemic may slow down this trend for some time. One of the common strategies adopted by shipping lines to efficiently serve the existing customers is the deployment of large ships. The current practice in the liner shipping industry is to deploy a combination of ships of different types with different carrying capacities (i.e., heterogeneous fleet), especially at the routes with a significant demand. However, heterogeneous fleets of ships have been investigated by a very few studies addressing the tactical liner shipping decisions (i.e., determination of service frequency, ship fleet deployment, optimization of ship sailing speed, and design of ship schedules). Moreover, limited research efforts have been carried out to simultaneously capture all the major tactical liner shipping decisions using a single solution methodology. Therefore, this study proposes an integrated optimization model that addresses all the major tactical liner shipping decisions and allows the deployment of a heterogeneous ship fleet at each route, considering emissions generated throughout liner shipping operations. The model’s objective maximizes the total turnaround profit generated from liner shipping operations. A decomposition-based heuristic algorithm is presented in this study to solve the model proposed and efficiently tackle large-size problem instances. Numerical experiments, carried out for a number of real-world liner shipping routes, demonstrate the effectiveness of the proposed methodology. A set of managerial insights, obtained from the proposed methodology, are also provided.

Carrier-shipper risk management and coordination in the presence of spot freight market

The spot freight market in the liner shipping industry has developed significantly in recent years and interplays with the long-term contract between carriers and shippers. Under this background, this paper presents a Stackelberg games model by taking into account both the carrier’s long-term decision (on freight rate) as well as the shipper’s long-term decision (on shipment capacity procurement amount) and spot market supplementary procurement decision. The shipper is risk-averse facing market uncertainty. Three basic shipping structures are considered: procuring only from carrier with long-term contract, only from spot market, and from both of these channels. We show that dual channels play different roles for the shipper. Although the spot market is not favourable for the carrier, it increases both the shipper’s utility and the carrier-shipper’s overall performance. Risk-aversion reduces the shipment capacity procurement amount, which protects the shipper but jeopardizes the carrier’s and the carrier-shipper’s overall performance. Fluctuations of market demand and spot freight rate have different (sometimes even opposite) impacts on the carrier and the shipper. Correlation of market demand and spot freight rate brings more uncertainty for the shipper but grants more leverage for the carrier. Coordination initiated by the carrier improves the carrier-shipper’s overall performance substantially, but full coordination is not feasible owing to the shipper’s aversion to risk. Quantity-discount rather than two-part tariff contract works.

The stochastic liner shipping fleet repositioning problem with uncertain container demands and travel times

Liner shipping repositioning is the costly process of moving container ships between services in a liner shipping network to adjust the network to the changing demands of customers. Existing deterministic models for the liner shipping fleet repositioning problem (LSFRP) ignore the inherent uncertainty present in the input parameters. Assuming these parameters are deterministic could lead to extra costs when plans computed by a deterministic model are realized. We introduce an optimization model for the stochastic LSFRP that handles uncertainty regarding container demands and ship travel times. We extend existing LSFRP instances with uncertain parameters and use this new dataset to evaluate our model. We demonstrate the influence of uncertain demand and travel times on the resulting repositioning plans. Furthermore, we show that stochastic optimization generates solutions yielding up to ten times higher expected values and more robust solutions, measured against the CVaR90 objective, for decision-makers in the liner shipping industry compared to the application of deterministic optimization in the literature.

Measures to Strengthen the Competitiveness of the Korean Shipping Industry in Preparation for the Era of the Green New Deal

본 연구는 우리나라 해운산업의 현황과 위기요인을 도출하여 그린 뉴딜 시대 대비 친환경 해운산업 경쟁력 강화 방안을 검토하기 위한 것으로서, 주요 검토 내용으로는 최근 주요 국가의 친환경 해운을 위한 동향과 해운산업을 지원하기 위한 해운산업 구조조정 사례 분석 후, 시사점을 도출하여 우리나라 해운산업의 구조조정 방향과 경쟁력 강화를 위한 주요 방안을 제시하는 것을 목적으로 한다. 따라서 우리나라 해운산업의 발전방향과 경쟁력 강화를 위한 주요 방안을 구조조정 측면에서 접근하여 주요국의 해운산업에 대한 구조조정 과정을 살펴보고 그린 뉴딜 정책에 따른 우리나라 해운산업의 경쟁력 향상을 위한 전략을 모색하는 것이 본 논문의 주요 목적이다.Purpose : This study aimed to examine, the majaor measures for developing the direction and competitiveness of the Korean shipping industry from the perspective of restructuring. Research design, data, methodology : The literature from all institutions related to the focus of this paper, apart from various foreign academic journals and books, was reviewed to identify a suitable research method on the restructuring of shipping companies to derive major implications after analyzing the current status of restructuring. Results : Liner shipping companies were found to be much more competitive than tramper ones. The global trend in the liner shipping industry must first have a global network, second, a competitive edge in terms of cost, and third, good service quality without which they e cannot survive in the world market. Global liner carriers also join the Alliance because it is difficult to operate on their own. From the restructuring cases that we examined, it was clear that it would not be easy to divide ownership and operation in a dichotomy, however, this is an essential factor. Conclusions : First, the pending issues and measures should ease the interest burden on shipping companies. Second, the government should suspend repayment of the principal of the shipping company and push for the conversion of its equity investment. Third, it should be possible to repay the principal of domestic shipping companies. Fourth, a win-win structure for shipping and shipbuilding should be established.

Anti‐Learning Behavior Toward Safety Risk: The Roles of Internal Context and Social Contagion

ABSTRACTManaging safety has become increasingly important in global operations. Surprisingly, the literature provides limited clues on what influences future accident hazards after the happening of a recent minor operational incident (MOI) in an organization. We examine the impacts of internal context (direct MOI experience) and external context (indirect MOI experience) on a focal organization's future serious accident hazard. Using an archival incident dataset from the liner shipping industry and drawing upon normalized deviation and social contagion theory, we find that after a recent MOI in a focal organization, the direct (internal context) and indirect (contagion source) MOI experience “increase” the likelihood of accident hazard. Furthermore, within the indirect MOI experience, there is “no” differential impact between related (same type and same region) and unrelated experience, whereas within related experience, spatial (region) and social (type) proximity do not differ in influencing the chance of future serious accident hazard happening. Our findings provide important implications for theory, practice, and policy‐making in safety management.

Probability estimation model for the cancellation of container slot booking in long-haul transports of intercontinental liner shipping services

The intercontinental liner shipping services transport containers between two continents and they are crucial for the profitability of a global liner shipping company. In the daily operations of an intercontinental liner shipping service, however, container slot bookings from customers can be freely cancelled during a booking period, which causes loss of revenue and low utilization of ship capacity. Though a pain-point of the liner shipping industry, the container slot cancellation problem has not yet been well investigated in the literature. To fill this research gap, this study aims to estimate the probability for the cancellation of container slot booking in the long haul transports of the intercontinental liner shipping service by considering the primary influential factors of cancellation behavior. To achieve the objective, a container slot booking data-driven model is developed by means of a time-to-event modeling technique. To incorporate the effect of booking region on the cancellation probability, we introduce the frailty term in the model to capture the regionality of the container shipping market. Our case study with real slot booking data shows that the developed model performs well in forecasting the loaded containers of the slot booking requests. In addition, we shed light on how the internal factors of slot booking and external factors of shipping market influence the probability of cancellation.

Accident Hazard After a Minor Operational Incident: Internal Context and Social Contagion Source

Managing safety has become increasingly important in global operations. Surprisingly, the literature provides limited clues regarding what influences future accident hazard following a recent minor operational incident (MOI) happened within an organization. This study examines the role of internal context (direct MOI experience) and external context (indirect MOI experience) on a focal organization’s future serious accident hazard. Using an archival incident dataset from the global liner shipping industry and drawing upon social contagion theory, we find that following a recent MOI within a focal organization, direct (internal context) and indirect MOI experience (contagion source) can increase future serious accident hazard by 29 and 14 percent, respectively. Furthermore, within the indirect MOI experience, there is no differential impact between related (same type and same region) and unrelated experience; within the related experience, spatial (region) and social (type) proximity do not differ in influencing the chance for future serious accident hazard to happen. This study provides critical implications for theory, practice, and policymaking in safety management.

Yield Management by Reconstruction of Cargo Contribution for Container Shipping

This study provides a cargo contribution yield management model to solve the ship capacity control problem for the container liner shipping industry. We propose a new objective to optimize cargo contribution to replace the focus on total revenue or average revenue in the current research. We reflect the special characteristics of yield management in container liner shipping, and all cost items were identified and calculated to develop a new cargo contribution evaluating system. We propose a mathematical model for service route segments’ allocation distribution based on cargo contribution. We use a genetic algorithm to solve the model further with comparative analysis with actual practice. The study cultivates new ground in the current literature with a wide range of innovative applications at a practical level.

협력적 게임이론에 기반한 해운동맹 제휴이익의 합리적 배분모형

In recent years, the liner shipping industry has been facing a difficult situation, such as a decrease in container transportation volume and a continued drop in container freight rates due to prolonged global economic recession and strengthened protectionist trade. Global shipping companies have been introducing large ships to secure cost advantage, but as a result, they are in a vicious cycle such as a drop in the loading rate due to extreme competition. In order to escape this situation, rival shipping companies are trying to partner with each other through a coalition. They can reduce costs and increase profits through transportation of containers by sharing ships together. However, in order for such a partnership to continue, a rational method of allocating the affiliate profits must be prepared. In this study, a mathematical model is proposed that maximizes the overall profit of affiliated companies when three or more companies form partnerships. And for the rational allocation of affiliate profits, a method of using the nucleous based on game theory is presented.

Do carrier expectations indicate industry structure in container shipping? An econometric analysis

In the competitive environment of liner shipping, the ability to nimbly adjust shipping capacity to demand could mean the difference between a thriving shipping operation and one that will most likely fail. How quickly and effectively carriers adjust their capacity may depend on how their expectations regarding trade volumes and freight rates are formed. We find that if adaptive expectations prevail in the decision process, capacity deployment may suffer some degree of inertia but, compared to expectations that are formed rationally, capacity would be be relatively stable. On the other hand, if carrier expectations are rational, capacity deployment might be more likely to align closer and faster with demand. We seek to empirically test whether carriers’ expectations of demand, aiming at deploying the right amount of capacity, can be characterized as adaptive or rational. We find that a) in most cases, adaptive expectations is the paradigm in container shipping; b) the way expectations are formed and the market structure of the liner shipping industry are two things not totally unrelated; and c) rational expectations point to more competitive markets (such as that of the Pacific), while adaptive expectations indicate higher concentration and thus imperfect competition (as is the case in the North Atlantic). Our findings have important regulatory implications in the sense that, if one accepts, as we do, that adaptive expectations are consistent with concentrated industries, while rational expectations suggest more competition, then our paper suggests that the 2008 abolition of the liner conference system from European trades has failed to improve the level of competition in the Europe – US liner shipping markets.

Service recovery and customer satisfaction in container liner shipping industry - an ordered logit approach

This paper assesses the responsiveness of service recovery process to customer satisfaction in container liner shipping (CLS) industry. The research deals with real-world business events, conducted using a survey method, in which customers evaluate service recovery scenario and complete a questionnaire with respect to CLS carriers they had recently patronised. Estimated by ordered logit regression method, the results show that timeliness of communication is the most significant service recovery attribute. It also finds that customers in different segments prefer receiving recovery resources in different ways; effective service recovery could help improve customer satisfaction and service recovery paradox exists in the industry. The findings contribute to the understanding of theoretical explanation of service recovery attributes and provide managers with useful guidelines for establishing effective recovery process. Unlike other research, this paper draws on data from actual customers in CLS industry and therefore benefits from increased external validity.