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Ship demolition activity. An evaluation of the effect of currency exchange rates on ship scrap values

Author

Listed:
  • Thanasis Karlis

    (University of Tasmania, Australia)

  • Dionysios Polemis

    (University of Piraeus, Greece)

  • Anastasios Georgakis

    (Business College of Athens, Greece)

Abstract

The demolition market assists in balancing the supply and demand in the shipping industry and from that perspective is a major driver of market equilibrium and the level of freight rates. Even so, literature related to ship demolition, focuses mainly on the environmental and regulatory aspects of the topic. Literature related to the economic analysis of the industry and the factors affecting demolition activity is rather limited and sporadic. From this perspective the current paper is helpful to further build up insight of the shipbreaking industry. The decision to sell a ship for scrap is driven by a number of factors with the most important being the state of the market cycle. The offered scrap price for the ship will also affect the decision of the shipowner. In this paper we support the view that ship scrap prices are affected by the currency exchange rates at the main demolition countries. We apply regression to evaluate our hypothesis. The regression results indicate a strong relation between ship scrap price and currency exchange rates of the main demolition countries albeit with some differentiations between vessel sizes.

Suggested Citation

  • Thanasis Karlis & Dionysios Polemis & Anastasios Georgakis, 2016. "Ship demolition activity. An evaluation of the effect of currency exchange rates on ship scrap values," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(3), pages 53-70, July-Sept.
    • Handle: RePEc:spd:journl:v:66:y:2016:i:3:p:53-70
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    References listed on IDEAS

    as
    1. Roberta Scarsi, 2007. "The bulk shipping business: market cycles and shipowners’ biases," Maritime Policy & Management, Taylor & Francis Journals, vol. 34(6), pages 577-590, December.
    2. World Bank, 2010. "The Ship Breaking and Recycling Industry in Bangladesh and Pakistan," World Bank Publications - Reports 2968, The World Bank Group.
    3. Knapp, Sabine & Kumar, Shashi N. & Remijn, Anna Bobo, 2008. "Econometric analysis of the ship demolition market," Marine Policy, Elsevier, vol. 32(6), pages 1023-1036, November.
    4. Saujanya Sinha, 1998. "Ship Scrapping and the environment-the buck should stop!," Maritime Policy & Management, Taylor & Francis Journals, vol. 25(4), pages 397-403, October.
    5. Georgios Samiotis & Konstantinos Charalampous & Vasileios S. Tselentis, 2013. "Recent Developments in the Institutional Framework of Ship Recycling and the Positive Impact on International Ship Dismantling Practices," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 63(3-4), pages 158-171, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Dry bulk market; Demolition; exchange rates; maritime markets;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • R49 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Other
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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