An econometric analysis for container shipping market

Meifeng LUO, Lixian FAN, Liming LIU

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

21 Citations (Scopus)

Abstract

This article presents an econometric analysis for the fluctuation of the container freight rate due to the interactions between the demand for container transportation services and the container fleet capacity. The demand is derived from international trade and is assumed to be exogenous, while the fleet capacity increases with new orders made two years before, proportional to the industrial profit. Assuming the market clears each year, the shipping freight rate will change with the relative magnitude of shifts in the demand and fleet capacity. This model is estimated using the world container shipping market statistics from 1980 to 2008, applying the three-stage least square method. The estimated parameters of the model have high statistical significance, and the overall explanatory power of the model is above 90%. The short-term in-sample prediction of the model can largely replicate the container shipping market fluctuation in terms of the fleet size dynamics and the freight rate fluctuation in the past 20 years. The prediction of the future market trend reveals that the container freight rate should continue to decrease in the coming three years if the demand for container transportation services grows at less than 8%.
Original languageEnglish
Pages (from-to)507-523
Number of pages17
JournalMaritime Policy and Management: The flagship journal of international shipping and port research
Volume36
Issue number6
DOIs
Publication statusPublished - 1 Jan 2009
Externally publishedYes

Fingerprint

Econometric analysis
Freight rates
Container shipping
Container
Fluctuations
Prediction
Container transportation
Shipping
Least square method
Interaction
International trade
Three-stage least squares
Statistical significance
Profit
Statistics

Cite this

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abstract = "This article presents an econometric analysis for the fluctuation of the container freight rate due to the interactions between the demand for container transportation services and the container fleet capacity. The demand is derived from international trade and is assumed to be exogenous, while the fleet capacity increases with new orders made two years before, proportional to the industrial profit. Assuming the market clears each year, the shipping freight rate will change with the relative magnitude of shifts in the demand and fleet capacity. This model is estimated using the world container shipping market statistics from 1980 to 2008, applying the three-stage least square method. The estimated parameters of the model have high statistical significance, and the overall explanatory power of the model is above 90{\%}. The short-term in-sample prediction of the model can largely replicate the container shipping market fluctuation in terms of the fleet size dynamics and the freight rate fluctuation in the past 20 years. The prediction of the future market trend reveals that the container freight rate should continue to decrease in the coming three years if the demand for container transportation services grows at less than 8{\%}.",
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An econometric analysis for container shipping market. / LUO, Meifeng; FAN, Lixian; LIU, Liming.

In: Maritime Policy and Management: The flagship journal of international shipping and port research, Vol. 36, No. 6, 01.01.2009, p. 507-523.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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