The demand for port services is affected by eight fundamental factors:
- Price of port service. According to a demand curve D, an increase in the price of a port service leads to a decline in demand at the given port, while a decline in the price leads to an increase in demand. This assumes that the port is in a competitive hinterland market, as ports in a captive hinterland are much less prone to this mechanism.
- Price of substitute port. If a port in the competitive hinterland offers a lower cost structure, then a share of the traffic will shift to this port. For any given price, the demand is lower (the new demand curve is Db). A reverse shift occurs when the port competing for the same hinterland increases its prices (the new demand curve is Dc).
- Price of complementary port activities. The full cost of using a port often includes complementary activities such as warehousing. Even if a port has a competitive price, if the price of all, or some of these complementary services increases, it can experience a decline in traffic. For any price demand lowers (shift of the demand curve from Da to Dc). Alternatively, lower complementary services can improve competitiveness and attract traffic.
- Hinterland market size. Growth in absolute GDP or GDP per capita in the port hinterland is associated with a shift in the demand curve, from Da to Db and the related volume (from a to b), with port price remaining constant.
- Market proximity. Due to changes in trade lanes and shipping services (and connectivity), a port can experience a decrease in market proximity (situation), shifting from a demand curve Da to Dc and a decline in traffic from a to c. On the other hand, a port can see an improvement in its situation, shifting to a demand curve Db, with an increase in traffic from a to c.
- Seasonality. Many ports experience seasonal variations in their traffic, even if their prices remain constant. This implies an annual shift from demand curve Da (low season) to demand curve Db (high season).
- Service quality. If a port can offer high service quality, it may shift from demand curve Da to Db, with the price increasing from a to b without affecting traffic. Alternatively, it might opt to maintain prices at the initial level, and capture further traffic (from a to c).
- Technological improvements. Various technological and managerial improvements, either single or cumulative, may allow a port to lower its price and handle higher traffic.
Demand changes are time sensitive. It is critical to distinguish between instant, short-run, and long-run shifts in demand for port services. Such shifts demand reorganization of service supply and thus take time to implement. Instant changes in the demand for one or more port services might be negligible. In the short run, organisational changes allow users to shift their demand elsewhere. In the long run, the rearrangements of the related maritime supply changes allow users to fully implement any decision to shift to other services if they so wish. Neglecting this mechanism can lead to inaccurate management or planning decisions.