An approach for measuring the optimal fleet capacity: Evidence from the container shipping lines in Taiwan

Excess capacity emerges as a persistent problem in the shipping industry and plays an essential role in determining the level of ocean freight. Consequently, the optimal fleet capacity has become a critical and frequently discussed issue within the container shipping industry. In practice, the designed capacity of a vessel is the most popular approach for measuring the fleet capacity for a shipping line. Despite this, it continues to lack the operational and economical reasonableness necessary to properly define or measure the capacity provided by a shipping line. This study has developed an economic model to find the optimal fleet capacity. In turn, the corresponding installation ratios have been computed to examine the level of excess capacity present and evaluate the performance of fleet development for three container shipping lines in Taiwan. The findings suggest that the shipping lines with deep-sea service routes are likely to deliberately hold excess capacity. Thus, the strategy of holding excess capacity to deter entry and maintain market power may have implicitly played a crucial role in determining the scale of fleet capacity for a container shipping line.