Optimal Ship Size and Speed

Optimal Ship Size and Speed

Maximising Profit through Ship Cargo Optimisation

The objective in optimising a ship’s cargo capacity is to maximise profit. From a financial standpoint, profit is what remains after subtracting total costs from total revenue. Therefore, optimisation can be achieved either by increasing income, reducing expenses, or both. The analysis should span the longest practical period available. The unit of measurement may be US dollars per ton of cargo, per deadweight ton (DWT), or per twenty-foot equivalent unit (TEU), depending on the specific application.

Optimising Ship Size

In recent decades, there has been a consistent move toward larger ships. The average size of ships within the global fleet has steadily increased, especially in the container and dry bulk sectors, where size records have been continuously surpassed. This trend is primarily driven by economies of scale. Nevertheless, several questions arise: If larger ships are more cost-efficient, why are smaller ships still in use? Why weren’t larger ships introduced sooner? What is the upper limit for ship size? And what sizes are best suited to various markets? Ship size optimisation is predominantly cost-oriented, as revenue per unit often remains constant regardless of ship size. Therefore, the optimal size is reached when overall costs are minimised.

Key Considerations in Determining Ship Size

Several factors influence the optimal size of a ship, the most important of which are outlined below:

  1. Demand Volume: The primary determinant is the volume of cargo to be shipped annually. This refers not to total seaborne trade but to specific types of cargo transported on particular routes serviced by the shipping company—such as crude oil, iron ore, coal, or containers. The cargo volume must be large and stable enough to justify ship operations over time and must meet customer expectations for service frequency. In the container shipping sector, alliances and mergers between shipping lines have expanded the accessible cargo base, allowing for the deployment of larger ships.

  2. Operating Costs at Sea: These include costs measured per deadweight ton of the ship or per ton of cargo, depending on whether the analysis is cost- or revenue-focused. Ideally, each deadweight ton would be fully utilised, but that is rarely the case in practice. Operating costs at sea encompass capital costs, crew wages, insurance, maintenance, and fuel—borne exclusively by shipowners. While cargo owners also face capital costs for goods in transit, these are not affected by ship size. In contrast, a shipowner’s capital and fuel costs scale with size, while crew costs increase only marginally.

  3. Port-Related Costs: A ship may call at a port for reasons such as bunkering, maintenance, or crew changes, but its primary function is to handle cargo. While costs like fuel, capital, and crew expenses continue during port stays, additional charges such as port fees and cargo handling also apply. Even though per-unit handling charges and flat-rate port fees may remain constant, larger ships spend more time in port due to their higher cargo volumes. Consequently, time-dependent costs such as capital and crew wages are influenced by ship size.

  4. Risk Costs: In theory, operating costs could be based on either deadweight tonnage or cargo tonnage, assuming full utilisation. In reality, utilisation is often suboptimal due to trade imbalances and market fluctuations. Larger ships face a greater risk of sailing underloaded unless more ports are called or transhipment is employed. They also face more restrictions in port access and reduced flexibility in reassigning routes. As a general rule, larger ships come with a higher risk of underutilisation.

 

 

Why Do Costs at Sea and in Port Respond Differently to Ship Size?

The size of a ship is optimised when total cost per ton is minimised. Among the four key factors influencing this optimisation, two are directly cost-related: costs incurred at sea and those in port. These two categories react differently to changes in ship size. Typically, costs at sea decrease as ship size increases, while costs in port tend to rise. This inverse relationship between ship size and at-sea costs has encouraged shipowners to build larger ships.

In contrast, the rising in-port costs associated with larger ships serve as a natural constraint against unlimited growth in size. The differing responses stem from two fundamental reasons, which explain the distinct size elasticities of these costs.

  1. Some At-Sea Costs Remain Fixed as Ship Size Changes
    At-sea expenses primarily include capital costs, crew costs, and fuel. For deep-sea shipping, crew size generally remains constant regardless of the ship’s size, making total crew cost effectively fixed. As a result, larger ships enjoy lower crew costs per ton of cargo. This cost-saving pattern also applies to administrative and shore-based personnel expenses. Since manning constitutes a major portion of operating costs, this fixed-cost effect creates a strong incentive for deploying larger ships.

  2. Other At-Sea Costs Grow at a Slower Rate than Ship Size
    While not fixed, several at-sea costs increase at a less-than-proportional rate as ship size grows. This applies to capital investment in the ship itself, insurance, fuel, and maintenance. For example, measured in cost per DWT, a panamax bulk carrier is around 24% cheaper than a handysize bulk carrier, and a capesize bulk carrier is about 43% cheaper. VLCCs (Very Large Crude Carriers) can cost just 40% per DWT compared to handysize tankers. Similar cost efficiencies apply to container ships. Because these expenses rise more slowly than the increase in capacity, there is a clear economic benefit in scaling up ship size.

  3. In-Port Costs Scale with Ship Size
    In contrast to sea-based expenses, most port costs increase with ship size. These are either tied to cargo volume or the time a ship spends in port. Cargo-handling fees, for instance, grow in proportion to the quantity of cargo handled. While the unit cost per ton may remain constant, total costs rise with greater volumes. More cargo also means longer port stays, and this increase in time is often more than proportional to the increase in size. Similar patterns hold for storage fees and cargo dues.

  4. Time-Related Costs in Port May Increase Rapidly
    Time spent in port due to loading and unloading becomes a major contributor to diseconomies of scale. Costs such as capital charges for ships and cargo, crew wages, and insurance are all time-dependent and are impacted by ship size. The more cargo a ship carries, the longer the turnaround time in port, which in turn raises these costs. If cargo-handling speed remains unchanged, port time grows proportionally with ship size. But if handling rates can be improved for larger ships, this effect can be mitigated. Nevertheless, the general trend is that while at-sea costs increase modestly with size, in-port costs rise more sharply, creating a natural trade-off in determining optimal ship size.

 

 

How Can the Optimal Ship Size Be Determined?

To identify the most suitable ship size, all four key factors—cargo volume, costs at sea, costs in port, and risk-related costs—must be considered collectively. A practical approach to understanding the relationship between these variables and the optimisation process is to use a real-world example.

Let us examine container shipping. For simplicity, we assume two ideal conditions: there are no constraints on cargo availability, and the ship operates at full capacity in both directions without facing commercial, operational, or technical risks. Under these assumptions, the optimal ship size is the one that minimises total cost, which is the sum of at-sea and in-port expenses.

At-sea costs consist of four primary components:

  1. Capital cost for the ship—calculated by applying interest rates to their purchase values over the voyage duration;

  2. Crew and operational costs—including insurance, maintenance, and other fixed expenses that show minimal elasticity with ship size and are treated as fixed;

  3. Bunker (Fuel) costs—which rise with increases in both ship size and speed, and are influenced by bunker prices and ship age;

  4. Cargo capital cost—based on the cargo’s value and relevant interest rates.

Since ship size does not affect sailing time, time-based costs—like crew wages and capital charges—remain constant or increase less than proportionally with ship size. As a result, the average cost per unit declines as ships grow larger, clearly reflecting economies of scale.

In port, however, the situation changes. Apart from cargo-handling charges, most in-port expenses are time-dependent and vary with ship size and the volume of cargo handled. Here, diseconomies of scale may emerge. While cargo owners are not impacted by ship size at sea, their capital cost at port rises significantly with larger ships. Yet shipowners may not always factor this in when determining optimal ship size.

Two cost scenarios emerge: one considers only the shipowner’s expenses and produces a lower total cost curve, suggesting a larger optimal ship. The other includes both the shipowner’s and cargo owner’s in-port costs, resulting in a higher total cost curve and indicating a smaller optimal ship. Thus, in cases like this, focusing solely on shipowner costs tends to favour larger ships, while including cargo-related port costs points to a more moderate size as optimal.

Understanding the Dynamic Nature of Factors Influencing Ship Size

Identifying the optimal ship size is a complex task, largely because most of the key determinants are not static. Their ever-changing nature makes ship size optimisation a relative concept—absolute precision in determining the ideal size is practically unattainable. These dynamic factors can be broadly classified into three categories based on their nature and impact: trade-related, port-related, and ship-related factors.

  1. Trade-Related Factors
    This group covers variables such as cargo volume and its evolution, transport distance, cargo value, and interest rates. Although previous analyses often assume stable and ample cargo availability, real-world conditions are far less predictable. When demand declines, larger ships are generally more exposed to underutilisation than smaller ships. Distance plays a crucial role too: as voyage length increases, the share of sea-based cost savings grows. This explains why larger ships are typically used on long-distance liner routes. However, extended port time for big ships leads to higher costs, particularly when handling high-value cargo. The capital cost of cargo is tied to financial metrics like the Internal Rate of Return (IRR) or market interest rates—both of which are highly volatile. When interest rates are low, capital costs for both ships and cargo decrease, making the use of larger ships more economically attractive.

  2. Port-Related Factors
    These include the number of port calls, overall port efficiency, and cargo handling performance. Port-related time costs are often the most decisive in determining ship size. These costs, which mainly consist of time-dependent capital charges for both the ship and the cargo, are heavily influenced by how smoothly a port operates—from technical services to administrative procedures. The total number of ports on a route, including transhipment hubs, also has a major impact. The idea that larger ships require more port time assumes that cargo-handling rates remain unchanged. In practice, port performance varies widely. At advanced terminals, large container ships can be served by up to seven cranes simultaneously. These significant gains in port productivity have been instrumental in the steady growth of average ship size. Note that cargo-handling costs per ton remain unaffected by ship size or time in port, and are thus excluded from this analysis.

  3. Ship-Related Factors
    This category includes shipbuilding costs, fuel (bunker) expenses, crew wages, insurance, and maintenance. While some of these—like crew and insurance—are time-based, the price of a ship is determined entirely by global supply and demand, making it highly volatile. This unpredictability directly impacts cost-optimised ship sizing. Larger ships generally consume less bunker (fuel) per deadweight ton (DWT), and as bunker prices fluctuate, so does the economic attractiveness of different ship sizes. Additionally, larger ships often require more transhipment to consolidate or redistribute cargo, driven by economies of scale and port limitations. While transhipment may help reduce ship costs, it increases the time and transport costs for the cargo itself, adding complexity to the optimisation process.

Optimising Ship Speed

A ship’s speed directly influences how much cargo it can transport over the course of a year. While speed is a technical parameter, it is equally an economic consideration. Technically, modern diesel engines enable ships to reach speeds that were impossible for sailing ships. Economically, time is a costly resource, and reducing it benefits both shipowners and cargo owners. However, when reducing time also results in increased costs, the goal becomes optimisation—not minimisation—just as with ship size. Unlike ship size, which is optimised by minimising total costs, ship speed is optimised by maximising profit, because speed influences revenue directly, whereas size primarily affects cost.

Key Factors Influencing Ship Speed

Three main stakeholders are affected by ship speed: shipping companies, cargo owners (shippers), and society at large. Each group may prefer a different optimal speed based on their respective roles. For shipping companies, transporting cargo is the core business, and their goal is to maximise profit by generating the highest possible revenue at the lowest cost. Shippers view maritime transport as a logistical input to their supply chain, so their objective is cost reduction, primarily consisting of freight charges and time-related expenses. From society’s perspective, beyond the interests of shipowners and shippers, environmental externalities must also be considered, such as emissions and pollution caused by maritime transport.

Shipping operates within a largely free and competitive global market. Freight rates, particularly over the medium and long term, are shaped by supply and demand dynamics. When demand exceeds supply, freight rates rise; when supply outpaces demand, rates fall. In a perfectly competitive environment, cost minimisation is the only path to profit maximisation for shipping firms. When considering the combined costs of shipowners, cargo owners, and environmental impact, profit maximisation becomes a societal objective as well.

Within technically feasible limits, a ship’s speed affects three critical areas: revenue, transport time, and cost. A higher speed generates more revenue and reduces voyage time but increases fuel consumption. At a fixed freight rate, lower total costs lead to higher profits. From a shipowner’s perspective, speed-related expenses fall into two categories: fuel costs—which scale directly with speed—and time-based capital and operating costs associated with both the ship and the cargo. For cargo owners, ship speed impacts inventory cost, which is similar to the capital cost of a ship and depends on cargo value and interest rates. Environmentally, speed influences greenhouse gas emissions, which can be quantified in terms of emission levels and their associated costs.

Considering all these variables, the optimal speed of a ship is primarily determined by six factors:

  1. Freight rate (revenue)
  2. Bunker (fuel) price
  3. Ship and equipment value
  4. Fixed operating costs
  5. Cargo value
  6. Environmental costs

Among these, freight represents the revenue component, while the remaining five are cost elements.

 

 

How Is the Optimal Ship Speed Calculated?

To determine the optimal ship speed with the aim of maximising profit, one must balance the revenue generated against the total costs incurred by the ship, cargo, and the environment. This includes five major cost components. The optimisation process for speed can be represented by the following equation:

Maximise Pd = Fd – Cd

Where:

  • Pd represents the daily profit

  • Fd is the daily freight income

  • Cd is the total daily cost, encompassing expenses related to the ship, cargo, and environmental impact

Daily freight income (Fd) is calculated by dividing the total freight revenue per unit by the total number of sailing days, which is in turn determined by dividing the voyage distance by the ship’s daily speed. The total cost (Cd) comprises five elements, including fuel, capital, and environmental costs.

Fuel consumption per day depends on the ship’s speed but is not a linear relationship. It varies significantly based on the ship’s design, load condition, weather, and sea state. A widely used approximation for this relationship is the cube law, where fuel consumption increases with the cube of the ship’s speed.

For cargo capital costs, differences in cargo value must be accounted for, even if a uniform interest rate is applied across different goods. Environmental costs are calculated by multiplying the amount of CO₂ emitted per ton of bunker fuel burned by the prevailing carbon price.

Thus, the formula can be extended to factor in all these components, allowing for a more comprehensive optimisation of ship speed based on economic and environmental variables.

Calculating the Optimal Ship Speed

To maximise daily profit, the optimal speed of a ship can be determined by balancing revenue against all relevant cost components—those related to the ship, cargo, and environmental impact. The extended formula for optimal speed is as follows:

Max Pₙ = F·Q·l / [d / (s·24)] – p·k·s³ – Cₒ – Vₛ·I / 365 – Σ(Vᵢ·I) / 365 – g·k·s³·Cₑ

Where:

  • P = daily profit

  • F = freight rate per ton

  • Q = ship’s deadweight cargo capacity

  • l = loading factor

  • d = total sailing distance

  • s = speed in nautical miles per day

  • p = bunker fuel price per ton

  • k = technical constant

  • k·s³ = estimated fuel consumption as a function of speed

  • Cₒ = daily operational cost of the ship

  • Vₛ = total capital value of the ship and equipment

  • I = annual interest rate

  • Vᵢ = cargo value per ton of cargo type i

  • n = number of tons of cargo

  • g = CO₂ emissions per ton of fuel consumed

  • Cₑ = cost per ton of CO₂ emissions

 

Interpretation

Both shipowners and cargo owners are affected by changes in ship speed, but in different ways. For high-value cargo, faster shipping reduces the inventory holding time and thus the cost, making shippers more willing to pay higher freight rates. In contrast, lower-value cargo sees less benefit from faster transit and is more sensitive to cost. As long as the increased freight rate does not exceed the inventory cost savings, faster speeds remain economically attractive to cargo owners.

 

What Is the Impact of Key Factors on Ship Speed?

Although six different variables influence the optimal speed of a ship, two are particularly significant: the freight rate and the bunker (fuel) cost. In a competitive market, freight rates are primarily shaped by the balance between supply and demand. Because both are subject to fluctuations, freight rates are known to be highly volatile—especially in bulk transport markets for basic commodities.

During periods of low freight rates, often due to oversupply, shipowners commonly adopt cost-saving strategies, with speed reduction being one of the most effective. Conversely, higher freight rates justify higher optimal speeds.

Bunker (fuel) cost, a variable directly tied to speed, is determined by the global oil market. As fuel prices fluctuate, they have a direct and substantial impact on optimal speed, in line with the widely accepted cube rule, which indicates that bunker (fuel) consumption increases exponentially with speed. To better understand the effects of these two primary factors, a scenario-based analysis is useful.

Scenario Used for Analysis

Consider a post-panamax bulk carrier with a capacity of 100,000 DWT operating between Qingdao and Amsterdam. The ship is valued at US$75 million, with a daily operating cost of US$9,500. The average cargo value (for dry bulk such as coal, grain, or iron ore) is US$200 per metric ton. The annual capital interest rate is 5%. Each ton of marine fuel burned emits 3 tons of CO₂, and the carbon price is set at US$25 per ton. To isolate each variable’s effect, one factor is held constant during analysis: when studying freight rate impact, fuel cost is fixed at US$300/ton; when analysing fuel cost impact, freight is held at US$30 per metric ton.

1 – Effect of Freight Rate
Although liner shipping is not as perfectly competitive as tramp shipping, freight rates in liner markets are still primarily dictated by global supply and demand, especially over longer timeframes and on major trade routes. Break-even points are influenced by ship size and loading factor. Larger ships are generally more resilient to freight rate fluctuations, whereas smaller ships often operate with higher load factors. Naturally, changes in other conditions—such as ship operating costs, bunker prices, cargo value, or interest rates—will also influence the optimal speed.

2 – Effect of Bunker (Fuel) Cost
As of May 2025, fuel remains the largest single operating expense for ships, influenced by global oil market dynamics. The average price for Very Low Sulfur Fuel Oil (VLSFO) across major bunkering ports is approximately $585 per metric ton, down from an average of $630 per metric ton in 2024 . Marine Gas Oil (MGO) prices have exceeded $900 per metric ton, while High Sulfur Fuel Oil (HSFO) averages between $450 and $550 per metric ton. These price levels significantly impact optimal ship speed decisions. For instance, when fuel is priced at $100 per ton, the optimal speed may exceed 25 knots—effectively full speed. However, as fuel prices rise to $300 per ton, the optimal speed decreases to around 19 knots. The break-even point in such scenarios is approximately $650 per ton.

Other Influential Factors and Observations

While factors like ship costs and cargo value are relatively stable in the short to medium term, others—such as freight rates, bunker (fuel) prices, and interest rates—are highly volatile. These variables can behave independently over short periods, affecting optimal speed decisions. Environmental costs, though increasingly discussed, have not yet become a decisive factor in determining optimal speed. In practice, freight rates and bunker fuel costs remain the primary determinants of optimal ship speed.

The Impact of Time Spent in Port

The amount of cargo a ship can move annually depends not only on its time spent navigating at sea but also on the periods when it is stationary. Non-sailing time may be used for ship repair, maintenance, operational delays at anchorage, or—most frequently—for cargo operations in port. Unlike factors such as ship size, speed, maintenance scheduling, or loading efficiency, port time is often beyond the direct control of shipping companies. This lack of control is one key reason why many shipping companies have expanded into the port business.

Why Is Port Time So Critical in Shipping?

Ships must call at ports for various reasons. One of the primary needs is bunkering—refueling either before or during a voyage. Decisions about where to bunker are sometimes economic, based on price differences between ports. Ships also need to call at ports for crew changes and to resupply provisions for the ship and crew. However, the most time-consuming activity during port calls is cargo handling. This operation typically takes up the majority of a ship’s stay in port.

Larger ships, in particular, require more time to load or discharge cargo. For example, a very large tanker or bulk carrier may handle over 250,000 metric tons of cargo, and unless the port operates with high efficiency, cargo operations can span multiple days.

Port time includes not only the cargo-handling period but also the time between a ship’s arrival and the start of operations, as well as the time between the completion of handling and final departure. This cumulative duration is referred to as Port Dwell Time.

Navigational constraints vary from port to port. A ship may arrive at anchorage ready for cargo work, but delays in reaching the berth can be substantial. Ports located up rivers, behind locks, or in areas requiring tugboat and pilot assistance often have slow and complex access routes.

In some cases, maneuvering in and out of the port can take longer than cargo handling and onboard services combined. Additionally, administrative procedures and customs formalities—highly variable across countries—can add further delays.

If a ship spends 25% of its year in port, its annual transport capacity is reduced by the same percentage. For instance, take two identical supramax bulk carriers each with 53,000 DWT capacity: if one spends 73 days in port annually and the other 110 days, the first will have approximately 10% more sailing days—and thus more cargo-carrying capacity. The relationship between port time and cargo capacity is inversely proportional and can be expressed as:

Ca = Cd × (365 – Tp) / 365

Where:

  • Ca is the ship’s actual annual carrying capacity (in DWT or TEU),

  • Cd is its designed carrying capacity,

  • Tp is the total number of port days per year.

So, if a ship spends 183 days per year in port, it effectively loses 50% of its carrying potential. This capacity loss mirrors an equivalent increase in cost—excluding fuel, which isn’t consumed while docked. Such extended port stays can significantly erode a shipping company’s profit margin. For this reason, reducing time in port is a critical strategic objective for any shipping company seeking to maximise efficiency and profitability.

Why Does Time in Port Vary Significantly Between Countries and Ports?

In highly efficient, modern ports, a ship’s total port stay can be completed in less than 24 hours. In contrast, similar ships may remain in other ports for several days or even weeks. These variations are primarily due to three sets of factors: natural conditions, technical and operational capabilities, and organisational and administrative practices. Each of these plays a crucial role in determining the duration of a ship’s port stay.

  1. Natural Conditions
    Geographical and navigational features significantly affect how long a ship stays in port. In tidal ports, ships may need to wait for the correct tidal window to enter or depart, which can lead to prolonged delays. Ports located far inland along rivers often require ships to navigate long distances through shallow, narrow, or congested waterways—further extending time in port. Ports with direct, deep-sea access have a considerable advantage in this regard. The growth in ship size has also driven a global shift in port development, with many facilities relocating from upstream to downstream areas or even offshore, to accommodate larger ships and reduce transit time.

  2. Technical and Operational Capabilities
    The quality and availability of port infrastructure and handling equipment directly impact operational efficiency. This includes underwater structures like berths and dredged channels, as well as shore-based equipment such as cranes and storage systems. Constructing and maintaining these facilities requires significant investment, especially in ports where natural conditions demand continuous dredging. With increasing ship specialisation, ports have moved away from multipurpose berths toward specialised terminals designed for specific cargo types. This transition has substantially improved handling speed in developed regions. However, many ports in less-developed areas lack adequate infrastructure and skilled management, resulting in extended ship stays. A survey from the 2000s found that ships in some developing countries spent over two weeks in port, compared to just a few days in more advanced regions. Even within the same region, major differences persist due to varying levels of investment and port management effectiveness.

  3. Organisational and Administrative Factors
    Delays in port are often linked to inefficient administrative systems and institutional bottlenecks. Time-consuming procedures related to customs, safety, security, and documentation can cause substantial delays. While some ports handle these processes efficiently, in many others they remain the primary obstacle to quick ship turnaround. In some cases, relaxed storage rules have led shippers to use port facilities as temporary warehouses, creating congestion that further delays ship operations. Although digital solutions like automated customs clearance offer some improvement, the most critical factor remains overall management quality. Ports that operate continuously on a 24/7 basis and apply streamlined procedures can significantly reduce turnaround times. It is widely recognised that improving organisational and managerial efficiency is the most effective and cost-efficient way to enhance port performance—more so than investing solely in physical infrastructure.

 

 

What Are the Costs and Benefits of Reducing Time in Port?

Unlike ship size or speed, there is no clearly defined concept of an “optimal time in port.” From the perspective of both shipowners and cargo stakeholders, minimizing port time is always desirable.

However, when the interests of port operators are considered, the situation becomes more complex. For a port, providing services involves both revenue and operational expenses. Treated as a commercial enterprise, the port’s optimal infrastructure level is reached when marginal revenue equals marginal cost. In this context, the question of optimal port infrastructure can also be framed as the search for an optimal waiting time for ships and cargo. If we assume that expanding port facilities reduces ship waiting time and berth occupancy rates—while increasing costs for the port—then the optimal waiting time is where the combined cost to both ports and the shipping sector is at its minimum.

The Berth Occupancy Rate—the ratio of time a berth is in use to total available time—is a critical metric. From the port’s standpoint, a high occupancy rate represents maximum asset utilisation.

From the shipping company’s point of view, however, the ideal scenario is always having a berth available upon arrival, meaning a low occupancy rate. The challenge is to find a balance between these opposing goals. Although many factors influence this balance, two are especially important:

  1. Ship Arrival Patterns
    When ship arrivals are unpredictable or random, average waiting times increase. Better planning, coordination, and use of data analytics can help maintain a high berth occupancy rate without causing congestion or delays.

  2. Number of Berths Available
    The more berths a terminal has, the less likely ships will experience delays. For example, a port with one berth and a 50% occupancy rate will result in a 50% chance of waiting. With two berths at the same occupancy level, the chance of simultaneous unavailability drops to 25%. Thus, expanding the number of berths can significantly reduce average waiting times.

From a broader shipping system perspective, the objective should be to minimise total cost across ships, cargo, and port infrastructure. In most cases, it is more cost-effective to accept a lower berth utilisation rate to ensure shorter waiting times. This is because the economic cost of idle ships and delayed cargo is usually much higher than the cost of underused port facilities. When the value of cargo is considered, the combined value of ships and cargo often outweighs port infrastructure by a factor of 3 to 5. Therefore, congestion at ports can impose greater national economic losses than underutilised assets.

In practice, the main issue is not always how long a ship stays in port, but how unpredictable that time is. Uncertainty in port dwell time creates serious scheduling and cost challenges. Ships often operate on tight timelines—especially in liner services or when multiple cargo commitments are time-sensitive. If port time were predictable, scheduling could be optimized accordingly. But given the uncertainty, shipping companies often rely on protective measures such as demurrage clauses, delay compensation, or avoidance of unreliable ports altogether.

The Impact of a Ship’s Operation-to-Maintenance Ratio

Maintaining ships in optimal condition is essential for ensuring both safety and operational efficiency. While much of this maintenance is performed onboard by engineers, ships must occasionally suspend their transport activities to undergo more extensive servicing at a port or repair yard—especially in the case of older ships. These maintenance intervals inevitably reduce a ship’s available time for cargo transport and thus affect its overall carrying capacity.

What Are the Maintenance and Repair Requirements for Ships?

Ship repair and maintenance generally fall into two categories: planned (or preventive) and unplanned (or corrective).

Planned maintenance is carried out in accordance with guidelines set by regulatory bodies such as the International Maritime Organization (IMO), Flag States, Classification Societies, and Marine Insurers. While there is overlap among these frameworks, each places emphasis on different aspects of safety and compliance. Most of these standards are mandatory and define the minimum acceptable levels of maintenance. However, many shipping companies enforce internal policies that exceed these standards, aiming to enhance reliability and minimise the risk of unscheduled breakdowns.

A core element of planned maintenance is the dry-docking cycle, often set at intervals of about two and a half years. During these dockings, ships undergo technical inspections and necessary repairs as mandated by their classification society in order to maintain certification. In addition to these routine checks, ships may also require unscheduled repairs due to mechanical failures or damage incurred while in port or at sea.

Many shipping companies employ a Planned Maintenance System (PMS)—typically computer-based—to track, schedule, and execute regular maintenance tasks. These systems are designed in accordance with manufacturers’ specifications and classification society rules. The primary philosophy behind PMS is to undertake systematic and preventive measures to minimise risk and unplanned downtime. Proper planning, record-keeping, and execution are not only best practices but also legal requirements under the International Safety Management (ISM) Code of the IMO, which mandates that all commercial ships implement a formal planned maintenance program.

How Does a Ship’s Age Affect Its Cargo-Carrying Capacity?

Throughout its operational life, a ship must remain in sound technical condition and meet seaworthiness standards. According to the International Maritime Organization (IMO)’s SOLAS (Safety of Life at Sea) regulations under the Goal-Based Standards, a ship’s design life refers to the theoretical timeframe during which it is expected to operate under typical environmental and loading conditions. However, the actual service life may differ significantly depending on how the ship is used and maintained over time.

A ship’s longevity is influenced by several factors, including its type and construction, operational environment, and the quality and consistency of its maintenance. Maintenance activities can generally be divided into three categories:

  1. Routine Maintenance – Conducted regularly by the crew during operations without requiring service interruptions.

  2. Intermediate Maintenance – Performed by specialists, usually when the ship is berthed. This may be part of scheduled surveys or prompted by technical issues.

  3. Periodic Dry Docking – Conducted at repair yards, typically every 30 months. This involves comprehensive maintenance, such as steel renewal, and becomes more extensive—and costly—as a ship ages.

By the time a ship reaches 10 years of service, it typically undergoes dry docking every two years to maintain compliance with class requirements. The scope and cost of repairs increase over time, especially after 15 years of service, when downtime for dry-docking can double or triple due to more intensive structural work. Costs vary based on steel prices, ship type, the yard, and the repair period, while dry-docking durations generally range from 1 to 2 weeks.

The Impact of the Loading Factor

The amount of cargo a ship can carry annually depends not only on its deadweight (DWT) capacity but also on how fully it is loaded during each voyage. In practice, full utilisation is rarely achieved due to a variety of operational and market-related factors. These include cargo availability, the shipper’s market position, the ship’s size and design, and broader supply-demand dynamics.

How Demand Affects Loading Factor

Insufficient cargo demand is the most direct reason a ship may depart underloaded. This situation often arises from oversupply in the shipping market. Trade imbalances also play a significant role. Unlike passenger transport, which generally involves round trips, cargo transport is directional. Many specialised ships—such as crude oil tankers or large dry bulk carriers—are designed for one-way voyages. While this results in lower loading factors on return legs, the efficiency gained through ship specialisation typically outweighs the operational cost of these underloaded legs. The freight rates applied in these trades are structured to cover the cost of both directions.

The situation differs in liner shipping, where ships are generally designed to carry cargo in both directions. However, in practice, trade imbalances still affect return loads.

Traditional general cargo ships—standardised in type and relatively small in size to allow for faster port turnaround—were historically designed for flexibility across global markets and were often loaded close to full capacity in both directions.

In container shipping, the dynamic is more complex. The globalisation of trade and the rise of integrated international supply chains have dramatically increased containerised cargo volumes—but not uniformly. For many years, regions like East Asia, particularly China, have exported significantly more cargo than they import. As a result, container ships are often optimised for one-way trade—known as head-haul routes—especially on the major East-West corridors. The capacity of these ships is therefore based on the outbound volume. Given the industry’s tight margins and intense competition, a carrier’s profitability is closely linked to maintaining high load factors even on the typically weaker return legs.

How Does Supply Influence the Loading Factor of Ships?

On the supply side, the loading factor of a ship is largely determined by its level of specialisation and its size. The more specialised a ship is, the narrower its cargo compatibility becomes, which makes it more difficult to maintain high load utilisation. As a result, general cargo ships usually achieve higher loading factors than highly specialised ships such as tankers or bulk carriers. Nevertheless, the operational efficiencies gained through specialisation often outweigh the disadvantages of lower load factors.

Some shipowners have attempted to improve load efficiency by developing multi-purpose designs like OBO (Ore-Bulk-Oil) carriers, capable of transporting crude oil and ore, but these designs have had limited commercial success.

There is also evidence of diseconomies of scale with regard to loading factor—meaning that as ships grow larger, achieving full utilisation becomes more difficult. This is especially true for container ships, which are more vulnerable to shifts in trade patterns. Bulk cargo ships, by contrast, are more likely to leave port fully loaded due to the nature of their cargo. Smaller ships are more flexible and can respond to changing market conditions more easily—for example, rerouting to alternative ports when cargo availability changes. Larger ships face more constraints, particularly in terms of the limited number of ports that can accommodate them.

Today’s ultra-large container ships, which can carry more than 24,300 TEUs, require ports to load thousands of containers per call—often between 4,000 and 5,000 TEUs—within tight timeframes. This demand puts significant pressure on port operations and inland logistics. Furthermore, large ships are slower to adjust to shifts in trade volumes or routing compared to smaller, more adaptable vessels.

What Are the Trade-Offs Between Ship Type, Size, and Loading Factor?

A ship’s loading factor is directly affected by two key elements: its type and size. There is generally an inverse relationship between the degree of ship specialisation and its load utilisation—more specialised ships typically have lower loading factors. However, this is different from the impact of specialisation on port efficiency, where specialised ships often reduce time spent per unit of cargo handled.

Container ships differ from other types in that their specialisation is not limited to a single commodity but rather spans a broad category of goods—general cargo. Combined with global supply chain dynamics and customer-driven logistics, this allows for better cargo availability on return voyages.

In liner shipping, which deals mostly in containerised goods, ships have a higher probability of being loaded in both directions. This contrasts with tramp shipping, where ships often carry natural resources or commodities and return empty.

The size of a ship also affects its loading factor. Generally, the larger the ship, the harder it is to keep it fully loaded—particularly in markets with inconsistent cargo availability. This is true even for container ships, where operational costs tied to low load factors rise with scale. Still, the significant cost advantages achieved through economies of scale make it worthwhile for many operators to accept these inefficiencies. To mitigate under-utilisation, many companies form strategic alliances in liner shipping to coordinate routes and share cargo space, helping to stabilise loading factors on large ships.

Since ships rarely operate at full capacity, traditional transport metrics like ton-miles do not always reflect the true volume of transport effort. In cases where ships carry cargo in only one direction, the effective ton-mile value should be doubled to account for the empty return trip.

Summary

The number of ships required to transport a given volume of seaborne trade is influenced by multiple variables, each of which affects the optimal utilisation of a ship’s cargo-carrying capacity. The first key consideration is ship size. Optimal size is determined by four main factors: demand volume, at-sea costs, port-related costs, and risk-related costs. Among these, port costs are the most significant limiting factor for increasing ship size, as larger ships incur higher system and time costs within ports. Therefore, the ideal ship size is achieved when total costs are minimised, and this optimal size can shift depending on variables like port efficiency.

The second factor is the optimisation of ship speed, which depends on six elements: the freight rate, bunker (fuel) price, the value of the ship and cargo, interest rates, and environmental costs. Among these, the freight rate and fuel price have the most direct impact on determining the optimal sailing speed.

The third component addressed is time spent in port, which is influenced by natural access conditions, the technical capacity of the port, and organisational efficiency. Minimising port time is in the broader interest of maritime transport, even when it requires significant investment.

Another important aspect is the management of ship maintenance, particularly dry-docking schedules. Effective maintenance planning directly affects operational availability and cost-efficiency, which in turn influences a shipping company’s competitiveness. A key area of competition between operators is how efficiently they maintain their fleets and maximise utilisation.

Lastly, the ability of a company to fully load its ships significantly impacts profitability. There is an inherent trade-off between ship size and average loading factor—larger ships may be harder to fill completely, but the cost savings from economies of scale typically outweigh the inefficiencies from partial loads. Ultimately, for any given ship capacity in deadweight tons (DWT), the actual ton-miles achieved depend on all five of the above factors.

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