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Shipping market integration: The case of sticky newbuilding prices

Author

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  • Roar Adland

    (Norwegian School of Economics (NHH), Helleveien 30, 5045 Bergen, Norway. E-mails: roar.adland@nhh.no; haiying.jia@snf.no)

  • Haiying Jia

    (Norwegian School of Economics (NHH), Helleveien 30, 5045 Bergen, Norway. E-mails: roar.adland@nhh.no; haiying.jia@snf.no)

Abstract

In this article we derive an equation defining contemporaneous equilibrium prices across the four shipping markets: the newbuilding market, the second-hand market, the demolition market and the freight market. The model requires rather general conditions, namely that (i) all second-hand ships are priced based on linear depreciation down to scrap value, (ii) expectations of the future scrap value and lifespan of the vessel are equal to current values and (iii) the term structure of (time charter) freight rates is observable. In the empirical part of the article we use this equilibrium relationship to illustrate the presence of a ‘term structure of newbuilding prices’ and show that the lower volatility of newbuilding prices compared with second-hand values is a result of a time-varying delivery lag, which is positively correlated with the alternative cost of operating in the freight market. These observations are important for statistical analysis of the dynamics of ship values.

Suggested Citation

  • Roar Adland & Haiying Jia, 2015. "Shipping market integration: The case of sticky newbuilding prices," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 17(4), pages 389-398, December.
    • Handle: RePEc:pal:marecl:v:17:y:2015:i:4:p:389-398
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    Citations

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    Cited by:

    1. Alexandridis, George & Kavussanos, Manolis G. & Kim, Chi Y. & Tsouknidis, Dimitris A. & Visvikis, Ilias D., 2018. "A survey of shipping finance research: Setting the future research agenda," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 115(C), pages 164-212.
    2. Hofmann, Erik & Solakivi, Tomi & Töyli, Juuso & Zinn, Martin, 2018. "Oil price shocks and the financial performance patterns of logistics service providers," Energy Economics, Elsevier, vol. 72(C), pages 290-306.
    3. Adland, Roar & Cariou, Pierre & Wolff, François-Charles, 2018. "Does energy efficiency affect ship values in the second-hand market?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 347-359.
    4. Kokosalakis, George & Merika, Anna & Triantafyllou, Anna, 2021. "Energy efficiency and emissions control: The response of the second-hand containerships sector," Energy Economics, Elsevier, vol. 100(C).
    5. Xiwen Bai & Jasmine Siu Lee Lam, 2019. "An integrated analysis of interrelationships within the very large gas carrier (VLGC) shipping market," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 21(3), pages 372-389, September.

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