Vessel capacity restrictions in the fleet deployment problem: an application to the Panama Canal

Abstract

This paper analyses the consequences of the upcoming Panama Canal expansion using a liner fleet deployment model (LFDM) applied to the container shipment routing problem. As the canal capacity will be increased in 2016 from 5000 TEUs to 13,000 TEUs vessels, new options will be offered to container liner shippers. Some earlier work has suggested impact on shipping patterns, transshipment and cost structures. We derive optimal results for a MIP implementation of the LFDM adapted to the Panama Canal problem for demand scenarios on different international container traffic routes corresponding to a range of ±17 % of the actual Canal traffic in 2014. Our results show positive effects on total costs from fleet redeployment of larger vessels to the Canal-crossing routes, leading to lowered vessel costs and higher utilization rates. The expansion is also environmentally advantageous since the fleet composition will induce lower bunker fuel consumption and thereby lower CO2 emissions. However, the total Canal costs are still predicted to be a minor proportion of the cost basis without incentives for additional or alternative Canal capacity.