IMPRINT-EUROPE
Implementing Reform in Transport
Effective Use of Research on Pricing in Europe
A European Commission funded Thematic Network (2001-2004)
PORT PRICING ISSUES
Considerations on
Economic Principles, Competition and
Wishful Thinking
H. Meersman, E. Van de Voorde and T. Vanelslander
University of Antwerp (UFSIA-RUCA and ITMMA)
This essay was prepared for the second seminar of the IMPRINTEUROPE Thematic Network: “Implementing Reform on Transport Pricing:
Identifying Mode-Specific issues”, Brussels, 14th/15th May 2002 PORT PRICING ISSUES
Considerations on Economic Principles, Competition and Wishful Thinking
_________________________________________________________________
H. Meersman, E. Van de Voorde and T. Vanelslander
University of Antwerp (UFSIA-RUCA and ITMMA)
______________________________________________
"Existing pricing structures  often suffer from trying to
satisfy conflicting objectives - economists, port
authorities, governments and port users will have
different views on what constitutes an efficient port
tariff" (Pettersen-Strandenes and Marlow, 2000).
1. INTRODUCTION
We have witnessed many political initiatives lately in relation to ports, port
authorities, funding of port infrastructure and pricing by  ports and operators within
ports. Typical examples at European level are the debate on Trans-European
Networks (TENs), the Green Paper on Seaports and Maritime Infrastructure
(European Commission, 1997) and the so-called Port Package (European
Commission, 2001).
This political preoccupation seems quite  logical at a time when discourse is
dominated by an apparent interest in  anything that may improve the market
mechanism, result in greater competition, or induce deregulation or privatisation. It
also ties in with the prevailing mental  framework in which such buzzwords as
‘globalisation’ and ‘contestability’ are used all too frequently.
Pricing by ports and operators within ports is historically determined. It is often quite
a complex and untransparent matter, and as such is sometimes perceived as archaic.
Debates on overt or covert subsidies, captive markets and the need to constantly
dredge and deepen maritime access routes undoubtedly raise questions in the minds of
those who are wary of potential distortion of competition and/or abuse of
monopolistic power but, at the same time, have little or no insight into the operating
of ports.
This paper deals with the issue of pricing for port calls and port services. We shall
deal consecutively with the questions of what a port is exactly and how port services
and transhipment should be defined. After  a brief survey of the most important
scientific literature on port pricing, we shall dwell upon some empirical aspects. We
shall consider prevailing pricing practice in various ports, econometric estimations of
price elasticity, and the calculation/simulation of marginal port call costs and
transhipment costs. In this manner, we intend to achieve the objectives of IMPRINTEUROPE, i.e. to “develop recommendations for how to implement transport pricing
reform based on the principles of marginal cost pricing”.
2 2.  THE ‘PORT PRODUCT’, PORT MANAGEMENT AND PORT
COMPETITION
In what follows, we shall deal consecutively with the specification of the ‘product’ for
which a port stands, with evolutions in terms of port management and with rapidly
growing port competition.
2.1 The ‘port product’
What specifically is the ‘product’ that ports have to offer? In other words, what
characterises the production and organisation of port services? Goss (1990, p. 208)
defines a seaport as follows: “A seaport may generally be regarded as acting as a
gateway through which goods and passengers are transferred between ships and the
shore” (Goss, 1990, p. 208). As for the economic purpose of seaports, this is
described as “to benefit those whose trade passes through them, i.e. through providing
increments to consumers’ and producers’ surplusses” (Goss, 1990, p. 207).
Jansson and Shneerson (1982, p.9) go one step further, and propose a division into
seven important subprocesses (approach  and mooring, loading on quays, transit
warehousing etc). In addition, they identify supplementary but not necessarily waterrelated functions (incl. customs, warehousing in the port area, cargo preparation, etc).
Therefore, the port product may be regarded as a chain of consecutive links, while the
port as a whole may itself be seen as a link in a global logistics chain (Suykens and
Van de Voorde, 1998, p. 252). Within ports, the relative importance of the separate
links has clearly changed in the course of time, in part because of efficiencyenhancing technological developments (e.g. rising containerisation rate, larger
vessels, speedier handling, etc). This has had (and indeed still has) consequences in
terms of the cost structure. To what extent, for example, have economies of scale and
costs been passed on to the various market parties?
Demand for port calls, port transhipment and supplementary services is derived from
demand for the goods involved and is thus a function of economic growth, industrial
production and international trade. In this context, pricing by and within ports is an
important indicator, certainly with regard to the choice of port. Especially significant
in this respect is the generalised cost that is associated with a port call. This
generalised cost is defined as the sum of out-of-pocket costs (i.e. the price to be paid
for the various services), time costs, and the risks of loss, damage and delay.
One should realise, though, that total port costs account for only a fraction of the total
costs associated with the logistics chain. Consequently, overall demand for port
services is inelastic, even though competition between goods handlers, port authorities
and regions or countries is quite fierce. On the other hand, The possibilities of
substituting one port for another are so great that demand elasticity for a specific port
may be high after all (Suykens and Van de Voorde, 1998, p. 252).
The prototypical port does not exist. Indeed, no two ports are entirely similar. Ports
inevitably have an heterogeneous quality,  cf. the large number of possible market
players involved (government, port management, shippers, forwarders, agents,
shipping companies, trade unions, etc), each of which has specific objectives. A
3 government and/or a port authority must be aware of the constant necessity to strike a
compromise between the priorities of the various market players. As the relative
strength of these market players may change in the course of time, so will, for
example, the objectives of the port authority. This explains why we have witnessed an
evolution from port authorities  that used to be interested mainly in growth in
throughput, employment, investment and value added to port authorities that are more
concerned with finding ways of participating as (more) active market players. Typical
examples of the latter are the participation of the port of Rotterdam in the container
terminal operator ECT.
2.2. Evolutions in port management
In recent decades, a number of obvious changes have occurred in the management of
most European ports. This evolution was a consequence of technological change, but
also of changes in terms of the socio-economic environment. The British port sector is
a very good example in this respect: nationalised after the Second World War and
grouped into the British Transport Docks Board; privatised as  Associated British
Ports in 1981; a government decision in  1991 that the main ports, too, may be
privatised. While such sweeping change has not occurred in the case of continental
ports, there has been an unmistakable trend towards greater autonomy (cf. the
autonomous status of the Port of Antwerp since 1997) and a more substantial private
stake in goods handling.
Moreover, there is a continuing trend towards more automation and technological
innovation, which has resulted in fewer  dock workers, often combined with a
reorganisation of the work itself. The capital-intensive nature of liner shipping, on the
other hand, demands an optimal capacity utilisation with a view to realising an
acceptable rate of return on investment. Port operators and port authorities are put
under increasing pressure to  continuously strive towards  a further improvement in
efficiency and labour productivity in particular. The port industry itself has, under this
pressure, also become capital intensive, characterised as it is today by very substantial
investments in both port infrastructure and cargo-handling equipment.
The playing field in which most port authorities can manoeuvre is described quite
aptly  by Saundry  and Turnbull (1997):  “It is no coincidence that the majority of the
world’s most successful ports conform to the landlord model, with public sector
involvement in the administration of the port as both land owner and regulator. This
allows the benefits of private sector management in the efficient handling of cargo to be
combined with the public and (common) user interests of both customers and other
important stakeholders. If port users are required to fund superstructure investment, in
port or whole, this will place an immediate and effective restraint on potential overcapacity”.
2.2 Growing port competition
This brings us to the issue of growing port competition, which has in recent years
assumed an entirely new dimension. It is, after all, no longer a matter of competition
between individual ports, but between logistics chains (Meersman, Steenssens and
Van de Voorde, 1997). A port either belongs to a successful logistics chain for a
4 particular goods flow or it does not. In other words, ports clearly have an incentive to
continuously improve their product. Or, as Goss puts it, “any improvement in the
economic efficiency of a seaport will enhance economic  welfare by increasing the
producers’ surplus for the originators of  the goods being exported and consumers'
surplus for the final consumers of the goods being imported” (Goss, 1990, p. 211).
Of course, this trend towards thinking in terms of logistics chains also implies that the
success of a port no longer depends solely  on its own performance, but on other
variables too, including connections with the hinterland. This may provide an
incentive for port management to cut port dues and to offer financial compensations
for unfavourable hinterland connections in an effort to retain or increase market share.
In this manner, port competition is threatening to get bogged down in a process of
ever-increasing investments in additional capacity, coupled with serious
underutilisation of that capacity.
In this context, De Monie (1996, p. 272) refers to container terminal operators who
offer their main customers integrated package services: guaranteed high sustainable
daily output rates (e.g. 1,500 moves per day per main-vessel line); an average of between
3 and 5 ship-to-shore gantry cranes simultaneously; flexible working of the vessels 24
hours a day, 7 days a week; limitation of waiting time for a container berth to the strict
minimum (zero?); warrant ship entry and exit of the port without hindrance or delay. As
De Monie argues, “such an extensive service package can be proposed only if political
approval has been obtained and adequate funds are available for investment in overdimensioned infrastructures, oversized superstructures and large numbers of equipment”
(De Monie, 1996, p. 273).
Perhaps here lies the reason why the European Commission is showing greater interest
in the port sector than before. This interest focuses particularly on four aspects, each of
which has repercussions on pricing for port  calls and transhipment services (Simons,
1997, p. 408). With regard to port access, there can be no abuse of a dominant position,
e.g. through exclusion of third parties. Competition between ports may be restricted
neither directly nor indirectly, e.g. through rail rates  or shipping alliances that
concentrate their activities on a limited number of ports. In respect of port services, one
wants to avoid excessively high or discriminatory tariffs for handling, pilotage and
towage. And with regard to government support, investments in infrastructure must be
accessible to all users, without discrimination and/or preferential treatment.
In sum, ports are extremely heterogeneous  environments, with many different market
players, many of whom have  conflicting interests. Consequently, the ‘port product’ is
complex and untransparent to many. Furthermore, competition has increased strongly,
not just between ports, but also between companies that may or may not be located in the
same port. Mutual accusations of unfair competition are rife, often resulting in
interventions on the part of the regulatory authorities. However, efficient intervention
requires insight, particularly into the aspect of port pricing.
3.  PORT PRICING: THE LITERATURE
Pricing by and within ports should be proportional to the costs generated by the ship in
question. In the case of a port call, there are three cost items to take into account: cargo
handling, the time in port, port dues and charges. The time spent in port is an opportunity
5 cost that is a function of the time-related operational cost (wages, repairs, etc), plus a
profit margin. Port dues are levied by the port authority in exchange for, among other
things, use of a berth. The most substantial cost, however, is that of goods handling. It is
usually many times higher than the port dues.
From a theoretical perspective, the pricing  principle seems simple enough. All tariffs
applied by and within the port should be  based on the short-run  marginal cost. This
principle should be adhered to, even in situations where the authorities have made
serious mistakes in their investment policy, or where the port is confronted with sudden
and unexpected changes in demand. Bennathan and Walters (1979, p. 6) qualify this
assertion to a certain extent: “strictly setting price equal to marginal cost is best only in
a perfectly competitive free economy or in an efficient socialist economy. In practice,
the port is confronted with organised and largely foreign-owned shipping cartels”.
On the other hand, in more recent work by Haralambides et al. (2001, p. 939), it is
asserted that “from a theoretical perspective, and assuming that a number of
conditions are fulfilled, long-run marginal costs represent the most appropriate basis
for efficient pricing”. And the authors go on to say that “irrespective of the cost basis
chosen, the principle that prices should accurately reflect (not to say recover) social
opportunity costs is crucial” (Haralambides et al., 2001, p. 939).
Clearly, then, there is a need for a detailed study of port pricing. As we have already
mentioned, the best approach is to start from the heterogeneous nature of ports, taking
into account the different market players, with different –possibly conflicting- interests.
Table 1 provides an overview of potential objectives of the various players.
Table 1: Port players and their possible objectives
Port Player  Possible Objectives
Government Efficient management of assets
Economists  Minimising the welfare losses
Port authorities  Maximising throughput
Maximising value added
Maximising employment
Users  Transparency of charges
Prices should reflect the costs of the services
Source: based on Suykens and Van de Voorde (1998) and Pettersen-Strandenes and
Marlow (2000).
Merely on the basis of the potential conflict situations that may arise from these different
objectives, we may conclude that “there is no single solution to the problem which is
port pricing” (Pettersen-Strandenes and Marlow, 2000, p. 8).
What does the literature on port economics tell us about port pricing? The ATENCO
project, which was carried out at the request of the European Commission, addresses
6 precisely this question. We quote (Haralambides et al., 2001, p 939): “the main
conclusion of a comprehensive academic literature review on port pricing (undertaken
in the context of the ATENCO project) was that pricing in ports can and should be
based on costs. The determination of which costs should be reflected in prices largely
depends on the type of port organisation. Prices in service or comprehensive ports
reflect a multitude of different costs - many of them joint costs, difficult to allocate in
a way that is not largely arbitrary - compared to prices in landlord ports where more
clear lines of responsibility and accountability exist”.
More recent research by Petteren-Strandenes and Marlow (2000, p. 4) divides the
pricing principles applied in the port literature into five categories: (1) cost-based
pricing; (2) methods for cost recovery; (3) congestion pricing;  (4) strategic port
pricing; (5) and commercial port pricing, which is applied in privatised ports.
In this context, it is quite fascinating to analyse which proposals are formulated in the
rather limited literature for implementing these theoretical pricing concepts. In Table
2, we attempt to summarise the most important elements put forward in a number of
important studies.
7 Table 2: Pricing concepts and implementation
Author(s)  Pricing concepts and implementation
Gardner (1977)  •
•
It is illogical to base pricing on the characteristics of a ship (e.g. length, draught, etc.)
Port prices, traditionally levied partly on ships and partly on cargo, should really only be based on the goods
themselves
Jansson and Rydén (1979)  •
•
A plea in favour of a two-part tariff structure
The tariff is divided into:
* a charge per tonne of cargo that would be differentiated with respect to the elasticity of demand
* a charge levied on the carrier to reflect the opportunity cost of using the facility
Button (1979)  •
•
The users of the port should be charged the full marginal social opportunity cost of the resources that they use
Some elements to be investigated: decreasing cost industry? What about financial deficits? How to recuperate
capital expenditures (e.g. by two part tariffs)?
Bennathan and Walters
(1979)
Vanags (1977)
•  A plea in favour of congestion pricing (note: intended mainly for ports in developing countries)
Arnold (1985)  •  Port tariffs are based on a mix of  pricing strategies designed to reflect the demand for port services, the
competition between ports, and the cost of providing the services.
8 Meyrick (1989)
Talley (1994)
•
•
A plea in favour of a cost-axiomatic approach, defined as "a pricing mechanism which determines the prices of
the outputs of multi-product firms by allocating the full cost of production to all the outputs
Further, it assumes that the demand for port services is relatively inelastic with respect to port prices
Unctad (1995)  •
•
•
•
Considers port pricing to be a strategic issue
Two basic approaches may be taken to pricing policy: one economic, the other financial. The former is
grounded on marginal cost pricing, while the latter bases prices on accounting costs
The 'cost, performance, value' (or CPV) approach allows port managers through tari s to accomplish different
sets of objectives.
* cost-based tariffs can maximise the use of port services;
* performance-based tariffs can maximise throughput and reduce congestion
* value-based tariffs generate sufficient revenue to cover the port's cost
CPV indicates both the threshold and the ceiling of prices: the port must not charge less than the incremental
cost of serving the user; it cannot charge more than the value received by the user.
Pettersen Strandenes and
Marlow (2000)
•
•
Suggest a port pricing policy where price differentiation is not based on the value of the cargo
Port prices should be differentiated on the basis of the quality of port services provided; relevant quality factors
are the time in port, and the punctuality of handling the vessel and its cargo.
Source: miscellaneous authors and Pettersen-Strandenes and Marlow (2000)
9 Even after a detailed analysis of Table 2, certain questions remain. How important is
port pricing in relation to the total cost? Authors such as Thomas (1978) claim that it
accounts for a significant proportion of the total cost, while Dowd and Fleming (1994)
maintain that the costs of port transhipment comprise “a rather small fraction of total
voyage costs for most long-distance inter-modal movements”.
Furthermore, a number of the pricing proposals presented in Table 2 are, first and
foremost, intended for developing countries, e.g. Bennathan and Walters (1979) and
UNCTAD (1995). Indeed, developing countries may potentially face a congestion
problem, whereas most European ports are confronted with significant overcapacity.
In addition, insight is urgently required into the real cost structure of a port call and
transhipment. Is there indeed evidence of economies of scale? And if there is, does it
apply to both port infrastructure and cargo handling equipment? If it does, then
marginal cost pricing will inevitably lead to port subsidising. There is an urgent need
for empirical cost analysis that goes beyond the assertion that “the fixed element of
port costs represents a substantial share of total costs. For container operations as
much as 80 per cent of the costs are independent of the number of vessels or volume
of cargo handled. For break bulk operations the fixed element typically is smaller, but
still 60 per cent of the costs are independent of the  volume, see Bennathan and
Walters (1979). Rudolf (1995) estimates the capital costs for container cranes at 70
per cent of total costs" (Pettersen-Strandenes and Marlow, 2000, p. 7).
4.  PORT PRICING IN PRACTICE
As we have previously mentioned, relatively little empirical research has been
conducted on actual pricing strategies by  and within ports. One of the few recent
exceptions is the ATENCO project that was carried out at the request of the European
Commission. The main findings of this project were presented in Haralambides et al.
(2001). The study certainly indicates that there are substantial differences between the
respective funding and pricing practices applied in ports across Europe. This diversity
is deeply rooted in different legal and cultural traditions. It is also a consequence of
differences in terms of port management style and the related issues of competencies
and degree of autonomy.
A first set of results was obtained on the basis of an analysis of survey questionnaires
aimed at gathering “information on both present pricing principles and strategies, and
the likely impact of introducing new pricing systems”. In this kind of research, there
is always a considerable danger that the parties involved may benefit from providing
biased information. Furthermore, not all ports can be analysed in the same way, as the
diversity in structure, scope  and type of operations is simply too great. Still, it is
worthwhile considering some of the conclusions reached (Haralambides et al., 2001,
p. 946 ff.):
All port authorities supported the adoption of overall full cost recovery within
the port sector. The majority of the ports supported the adoption of “user pays”
principles in ports. Surprisingly, most port authorities expected that the
adoption of full cost recovery pricing  would have little impact on pricing
levels.
•
10The port authorities did not consider the markets for liquid and dry bulk
cargoes to be influenced by public support schemes. However, they did for the
markets for general cargo, containerised and Ro-Ro cargo. A number of ports
were in favour of the adoption of general pricing principles to the extent
however that adherence to these principles would still allow flexibility and
that hinterland transport pricing should be subject to similar principles.
•
•  The port users were generally aware of some impact or distortion caused by
public support schemes in European ports. The users considered the impact to
be of limited relevance in relation to the prices charged by the port operators
to the users and of some importance in relation to the overall port user costs.
These conclusions are interesting as such,  but some circumspection is nevertheless
called for, if only because of the non-committal nature of this type of survey. Perhaps
this is why the survey was supplemented with quantitative simulations. The purpose
was to arrive at an analysis of the effect of different pricing schemes on traffic
volumes in individual ports. The application concerned container traffic through the
ports of the North Range. Table 3 provides an overview of the estimated elasticities.
Table 3: Price elasticities for selected North Range container ports (10% price
increase, simulation results)
Port Elasticity
Hamburg 3,1
Bremen Ports  4,4
Rotterdam 1,5
Antwerp 4,1
Le Havre  1,1
Source: Haralambides et al. (2001, p. 948)
The findings presented in Table 3 are questionable. Irrespective of the methodology
applied in estimating the elasticities, it seems very hard to interpret these figures
meaningfully. The findings reported concern container throughput. It is widely
accepted that container throughput responds much more sensitively to flows that are
related to transhipment via the hinterland. This greater sensitivity is due to the fact
that shipping companies can switch from one transhipment port to another fairly
quickly, cf. the cases of Maersk Sealand and Evergreen, who recently substituted the
Malaysian port of Tanjun Pelepas for the port of Singapore. However, the proportion
of transhipment in a port such as Rotterdam is much higher than in Antwerp or
Hamburg. Nevertheless, the reported elasticities for the latter two ports are many
times greater than that for Rotterdam, which is quite remarkable. Moreover, it would
be interesting to explore in detail whether Rotterdam’s declining market share in 2001
was perhaps mainly due to a loss of market power in the transhipment business
relative to such Mediterranean ports as Giao Tauro and Taranto (e.g. due to pricing
and differences in generalised cost).
11Despite the above reservations with regard to the estimations of the elasticities, it is
interesting to see how the authors themselves interpret their findings (Haralambides,
2001, p.948):
• They observe a very substantial divergence of the elasticities among the
various ports. This implies that, if the elasticities are correct, a change in price
occasioned by alternative pricing schemes would, in the case of container
transhipment, have fundamentally different consequences for the ports
considered;
• The price elasticities appear to diverge strongly  across the different goods
categories, i.e. much lower elasticities for liquid and dry bulk than for
containers, general cargo and Ro-Ro;
• The introduction of new pricing schemes based on the principle of overall
full cost recovery per individual port  may result in cross-subsidising. Ports
whose income is generated for a large part by bulk transport and land letting to
industrial concerns  can, after all, compensate for price increases in general
cargo, containers and Ro-Ro.
In the ATENCO project, two additional sets of case studies are conducted with regard
to the impact of port funding and pricing  on the introduction of the cost recovery
approach. A first set analysed two British and one Irish port. The general conclusion
speaks volumes (Haralambides et al., 2001,  p. 950): “The case studies of ports
practising full cost recovery demonstrates the presence of a wide variety of pricing
principles used in practice. The pricing strategies of these ports exhibit substantial
managerial discretion that cannot be captured fully by textbook definitions of pricing.
A best practice formula for pricing in the real world clearly does not exist, not even in
ports pursuing full cost recovery as a primary objective”.
Equally important, however, is the conclusion that “in contrast to the widely held
belief that UK and Irish ports engage in conventional full cost recovery, the study
found that users in fact do not pay for past capital investments in terms of their
replacement value” (Haralambides e.a., 2001, p. 949).
Formulating a conclusion in relation to the practice of pricing can only increase the
confusion that presently exists. Moreover, it is clearly difficult to outline a typology
into which all ports will fit. It appears that the ports that ‘preach’ full cost recovery do
not pass on historical costs, which may be considered as a form of covert subsidising.
Thus, research on port pricing behaviour is by no means methodologically sound.
Empirical research has, so far, been rather limited and there  are doubts as to the
accuracy of the model-based findings.
5.  CALCULATING THE MARGINAL COST OF A PORT CALL
Infrastructure pricing remains a complex matter, certainly in the case of ports. It is
often argued in this respect that port accounting systems provide no foundation for
any other pricing method than one based on average costs. Haralambides et al. (2001,
p. 939) assert that “in practice, and in the absence of ‘measurable’ marginal costs,
approaches based on average costs also appear to perform reasonably well in
approximating marginal costs”.
12However, this assertion no longer holds. A study commissioned by the European
Union (TRL Ltd et al., 2001) attempts to concretise the concept of marginal costs.
After all, marginal cost pricing is only possible if the marginal costs are known and
thus measurable. One of the two case studies that were carried out concerns the
calculation of the marginal costs of a port call, more specifically at the port of
Antwerp. By way of illustration, we shall  briefly discuss a number of empirical
findings.
In the view of many people, port pricing is traditionally limited to the due that is paid
to the port authority or port management for the use of its services. This, however,
covers only part of the port picture. Marginal costs encompass a lot more than the
costs incurred by the port authority. Moreover, ports dues levied by the authority
often do not reflect underlying costs, but constitute some arbitrary approximation
based on comparison with other ports or experience from the past. The fact that they
are often not split up according to the services actually used seems to confirm this
argument.
On the one hand, and in short-term perspective, port prices are an important element
in inter-port competition. As a port authority will inevitably be concerned with
improving its competitiveness, it had better work on reducing the costs underlying
dues charged, not only for its own services,  but, if applicable, also for services
provided by private companies in the port area. This will usually result in the same
price-reducing effect as with a blind reduction in prices, but – importantly in the
context of sustainability – in a manner that conforms to normal market operations. On
the other hand, prices charged constitute the financial means that should allow the
port authority to maintain quality of service through investments (in maintenance and
further development).
Both for the short term and the long term, an understanding of marginal cost
components is required. As in other transport modes, one can  distinguish between
four elements of marginal costs in port operations conceived as a part of the maritime
mode. Leaving aside for the time being the issue of who incurs these costs, the four
elements are (i) costs for provision of infrastructure, (ii) costs associated with use of
the transport mode, (iii) costs for supplying port services, and (iv) external costs.
In what follows, the composition of the previous cost elements is illustrated using data
for the port of Antwerp. The figures are the most recent available, with source years
ranging from 1999 to 2001. All figures are expressed in terms of a base year (1988),
using a factor that takes into account depreciation. Furthermore, all figures refer to an
entire shipload. Alternatively, one could calculate figures  per unit of load (TEU or
dwt), but some of the figures obtained would then be too small to allow comparison.
13Table 4: Overview of Cost Element Subdivision
Infrastructure:
•  Capital
•  Running
Transport User:
•  Time
•  Reliability
Supplier / Operator:
•  Vessel:
o  Running
o  Time
o  Reliability
•  Service:
o  Running
o  Reliability
•  Superstructure:
o  Running
o  Time
o  Reliability
External:
•  Accident:
o  Material
o  Human
•  Noise:
o  Amenity
o  Human
•  Air Pollution:
o  Natural Environment
o  Human
Source: TRL Ltd et al., 2001
Marginal infrastructure costs mainly comprise costs of replacement and maintenance
of locks. On average, one supplementary vessel calling at the port accounts for 242
EURO in costs, irrespective of the cargo.  This cost is incurred by the provider of
infrastructure, in most cases the port authority or the public government, depending
on the organisational structure of the port. At present, it is often the case that only part
of this cost is passed on to the infrastructure users, often through the setting of
arbitrary prices. It is apparent from the literature and from correspondence with port
industry representatives that elements such as breakwaters, navigation lights, buoys
and radar systems have no marginal cost components; nor, for that matter, do
dredging and ice-breaking.
As far as the use of the maritime transport mode is concerned, marginal costs centre
on time used and reliability of service (in terms of overtime and loss of customers).
This cost is incurred by the transport user calling at a port in order to convey the
14goods to or from his customer. As the value of the commodity in process is the main
determinant of this cost category, the amount involved is largely dependent on the
type of commodity transported and the volume handled. Figures for Antwerp range
from 2,769 EURO per tanker (carrying 9,363 dwt) to 951,791 EURO per dry bulk
vessel (carrying 28,533 dwt). For dry bulk, cost figures vary from 44,289 EURO for a
8,000 dwt-vessel to 1,367,330 EURO for a 45,000 dwt-vessel. Time costs are usually
only passed on to shipowners, as they concern overtime or unreliability of service.
Normal time costs (capital imbedded in the goods) are entirely for the account of the
owner of the goods.
Costs for supply and operation of handling  services can be subdivided into costs
related to vessels, the superstructure and the actual service. The term ‘vessel’ is
understood to include commercial vessels transporting the goods as well as pilotage
and towage vessels. Spare parts and oil for maintenance and fuel for operation are the
main cost components. The above items amount to a cost of 2,489 EURO per tanker
(carrying 14,760 dwt) and to 9,377 EURO per container vessel (carrying 31,372 dwt),
again allowing for variations in ship size. These costs are incurred by or passed on to
shipowners, who in turn usually pass them on to the owners of the goods. An
important element that is not included and thus not charged for is the opportunity cost
of the vessel capital: while this cost is by no means negligible, it is hard to asses what
would be the best alternative use of capital, as the relevant data is presently not
available.
Service costs include wages for crew, handling personnel, storage personnel, shipping
agency, ship repair and bunkering, both in normal circumstances and in overtime
situations (due to unreliability of service). On average, they make up a cost ranging
from 1,056 EURO per container vessel (unloading and loading of 29,812 dwt) to over
three times this amount for dry bulk vessels (unloading and loading of 53,453 dwt).
Again, figures are heavily dependent on the volume of cargo to be loaded or
unloaded. Wages are usually passed on directly to the shipowners and transferred to
transport users.
Superstructure costs are comparable to vessel costs, but the former concern operations
on land. Note that they are non-existent for tankers (since direct supply to the refinery
or a derived company applies), while  they amount to about 2,199 EURO for a
container vessel (unloading and loading of 29,812 dwt), and 1.5 times as much for dry
bulk vessels (unloading and loading of 53,453 dwt). Again, opportunity cost of capital
is not taken into account.
The external cost category, too, can be  further subdivided:  we may distinguish
between accident costs, noise costs, and air pollution costs. Accidents cause damage
to material as well as to people. Own and third party vessels and the goods transported
are the most important material categories affected. Injuries to crew and workers
constitute the human cost. Overall  accident costs are highest for container vessels
(32,778 EURO per vessel, assuming that 747 TEU is unloaded or loaded), whereas
they are non-existent for tankers. Figures vary according to cargo volume. These costs
are, in principle, borne by the originator, but they are typically subject to insurance,
whereby forfaitary amounts are reimbursed.  
15Noise costs are hard to estimate, but all studies available indicate that noise effects of
port activities are very limited, so we can safely disregard their marginal cost effect.
Air pollution costs are quite a different  matter, though, as pollution levels are
typically higher in ports than in surrounding  areas. However, it is not always clear
whether this is caused by shipping or by  local industry that  is supplied by these
vessels. Additional research is required to clarify this matter. Monetary quantification
of air pollution effects is even more complex, as further research is needed to
complete the marginal cost picture. These marginal cost elements have until now
hardly been passed on to the originators.
6.  CONCLUSION
As we explained in the introduction, pricing by ports and operators within ports has
developed historically. As such, it is often rather complex, untransparent and archaic.
This has occasioned many debates on allegedly covert subsidising, captive markets,
the necessity of dredging and deepening maritime access routes, and possible
distortion of competition.
This contribution, which includes a brief overview of the most important scientific
literature on port pricing and available empirical data, provides further confirmation
that the picture is quite confusing. Ports, i.e. port authorities and port-based concerns
(goods handlers, agents, etc), often go it alone when it comes to pricing. Outlining a
typology of port pricing schemes is therefore more or less impossible. Even ports that
preach the full cost recovery approach appear to engage in subsidising, if only by their
failure to pass on historical costs.
Methodologically, research into pricing behaviour within ports certainly has some
way to go. An acceptable methodological framework is absolutely indispensable for
meaningful empirical research. We are, therefore, still quite far removed from the
objectives of IMPRINT-EUROPE, i.e. “developing recommendations for how to
implement transport pricing reform based on the principle of marginal cost pricing”.
Nevertheless, at the request of the European Union, a first step has been made in the
calculation of the marginal cost of an average port call. This material may constitute
the basis for a meaningful debate on the implementation of a pricing approach that is
grounded on the marginal cost principle.
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18