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The dynamic relationship between freight markets and commodity prices revealed

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  • Vangelis Tsioumas

    (University of Piraeus)

  • Stratos Papadimitriou

    (University of Piraeus)

Abstract

The aim of this study is to investigate empirically the relationship between the dry bulk freight markets and the prices of ‘major bulks.’ The relationship has not attracted much attention in the literature so far. However, changing commodity prices can influence the timing and quantity of imports and exports and, by extension, the volume of seaborne trade. In this context, many maritime practitioners tend to monitor the levels of commodity prices in order to obtain insights into the anticipated demand for bulk carriers. Therefore the examination of this relationship deserves further attention. The elements of our analysis consist of representative prices of coal, iron ore, and wheat, and Baltic Exchange indices that correspond to the most widely used vessel size for each commodity. In particular, we focus on the lead–lag relationship between each pair of variables, employing cointegration analysis, Granger Causality tests, and Impulse Response analysis. Our results imply the existence of a bidirectional relationship in the cases of iron ore and coal, while they indicate that wheat price leads the Baltic Panamax Index but the opposite is not true. These findings can support decision making in both dry bulk chartering and commodity trading.

Suggested Citation

  • Vangelis Tsioumas & Stratos Papadimitriou, 2018. "The dynamic relationship between freight markets and commodity prices revealed," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 20(2), pages 267-279, June.
    • Handle: RePEc:pal:marecl:v:20:y:2018:i:2:d:10.1057_s41278-016-0005-0
    DOI: 10.1057/s41278-016-0005-0
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    Cited by:

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    3. Sun, Xiaolei & Liu, Chang & Wang, Jun & Li, Jianping, 2020. "Assessing the extreme risk spillovers of international commodities on maritime markets: A GARCH-Copula-CoVaR approach," International Review of Financial Analysis, Elsevier, vol. 68(C).
    4. Ioannis Karaoulanis & Theodore Pelagidis, 2021. "Panamax markets behaviour: explaining volatility and expectations," Journal of Shipping and Trade, Springer, vol. 6(1), pages 1-24, December.
    5. Yimiao Gu & Zhenxi Chen & Qingyang Gu, 2022. "Determinants and international influences of the Chinese freight market," Empirical Economics, Springer, vol. 62(5), pages 2601-2618, May.
    6. Adewuyi, Adeolu O. & Adeleke, Musefiu A. & Tiwari, Aviral Kumar & Aikins Abakah, Emmanuel Joel, 2023. "Dynamic linkages between shipping and commodity markets: Evidence from a novel asymmetric time-frequency method," Resources Policy, Elsevier, vol. 83(C).
    7. Arunava Bandyopadhyay & Prabina Rajib, 2023. "The asymmetric relationship between Baltic Dry Index and commodity spot prices: evidence from nonparametric causality-in-quantiles test," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 36(2), pages 217-237, June.
    8. Wei, Jiangqiao & Ma, Zhe & Wang, Anjian & Li, Pengyuan & Sun, Xiaoyan & Yuan, Xiaojing & Hao, Hongchang & Jia, Hongxiang, 2022. "Multiscale nonlinear Granger causality and time-varying effect analysis of the relationship between iron ore futures and spot prices," Resources Policy, Elsevier, vol. 77(C).

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