Title

An econometric analysis for container shipping market

Document Type

Journal article

Source Publication

Maritime Policy & Management: The flagship journal of international shipping and port research

Publication Date

2009

Volume

36

Issue

6

First Page

507

Last Page

523

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%.

DOI

10.1080/03088830903346061

Print ISSN

03088839

E-ISSN

14645254

Publisher Statement

Copyright © 2009 Taylor & Francis.

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Full-text Version

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Recommended Citation

Luo, M., Fan, L., & Liu, L. (2009). An econometric analysis for container shipping market. Maritime Policy & Management: The flagship journal of international shipping and port research, 36(6), 507-523. doi: 10.1080/03088830903346061