Managing capacity in the inland waterway sector: To intervene or not to intervene?
The current inland waterway transport (IWT) markets are characterized by surplus capacities. The supply of loading capacity in both the dry and liquid bulk markets have increased much more than demand. This chapter deals with the underlying reasons. A distinction is made between the dry cargo market and the tanker market because both markets function differently. A common problem is the influx of additional capacity which will remain operational for a long period (50 years). According to supply and demand, freight prices increase in times of high demand for loading capacity. In a perfectly competitive market, an increase in freight rates attracts more IWT barge operators bringing more IWT vessels into the market. Moreover, if a further growth in demand is expected, then more vessels will be ordered and built. Because there is a large time lag between ordering and delivering new tonnage (± 1.5 years), the barge operator tends to run a high risk of overshooting the demand for IWT shipping capacity. From the supply side, there is also the problem that the IWT market is unable to decrease capacity. So, excess supply results in overcapacity. The inefficiency due to overcapacity is more difficult to eliminate. In a perfectly competitive market, this leads to the situation shown in Figure 4.1.