From a general macroeconomic perspective, the strategic objectives of the port, and therefore those of the port service providers (which might be the managing entity of the port, a terminal operator or a hybrid entity) define the overall focus, and thus the level of port services supply. Ports might opt for any of the three available strategies. The first is prioritizing social and economic development, often accepting lower profitability for regional growth. The second one is to prioritize private interests and focus primarily on profit generation and delivering value to shareholders. The third one is to balance, public and private Interests, thus aiming to achieve financial viability while maintaining public service commitments. The selected strategic objective affects planning and the types of entities offering port services at a port. For example, according to a recent European Sea Ports Organisation (ESPO) survey, 63% of European ports focus on balancing public and private interests, 28% on public interests, and 9% on private interests.
At microeconomic level, the relationship between the price of transport services and the supply of port services depends significantly on the objectives of the service provider. The supply response to the price of port services depends on whether the provider aims to maximize profit or operates under a public service framework:
- Profit-maximizing providers: When the primary goal of the service provider is to maximize profits, the supply of port services is directly responsive to changes in price. Price increases make providing the service more profitable, encouraging providers to expand their supply. This reflects the classic upward-sloping supply curve. Respectively, as lower prices reduce profitability, providers will likely cut back on the quantity they are willing to offer. This behavior aligns with standard economic theory, where firms adjust their output based on price signals to optimize revenue.
- Public Service-Oriented Providers: In cases where port services are provided under a public service regime or are considered essential for social welfare, the relationship between price and supply is less direct: The supply of services remains stable despite service providers. Service providers may maintain or even increase supply irrespective of profit margins if the service is considered vital for public benefit (e.g., supporting regional development, ensuring social cohesion, or maintaining essential trade routes). In this case, non-profit motivations are significant. Supply decisions may prioritize accessibility, economic stability, or long-term strategic objectives over immediate financial returns.
Cargo handling and related port services in seaports serving international trade and broader hinterlands and forelands fall in the first of these categories, irrespective of whether the port service provider is a private terminal operator or a publicly owned or hybrid entity. Exceptions in these cases are few. In secondary or smaller ports, the scale of provided services is determined differently. Typically, a government-owned port serving an island or remote community may continue to provide services even at a loss to promote local industries or connect remote regions with economic centres. An illustrative example is ports serving island communities. In absolute numbers, the ports of the second category outnumber those of the former. However, he vast majority of the world cargo throughput is today handled by ports where services are offered by ports where the quantity of the services.