Quotation Schramm, Hans-Joachim, Auer, Alexander. 2012. Investigation of container shipping freight rate determinants on the transpacific trade lane - a simultaneous equation model approach. Research Seminar at CBS, Copenhagen Business School, Copenhagen, 04.12.


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Abstract

Today, container shipping is dominated by trade imbalances, overcapacities and a more or less transparent pricing behaviour by container carriers on the market. Therefore, the purpose of paper is to investigate price and quantity determinants of freight rates and ship capacities, which is done in the case of the transpacific trade lane between Far East and North America (i.e. USA and Canada). Taking a sample of 14 different variables with quarterly data between 1996 and 2009 our aim is sort out the interdependencies of freight rates and ship capacities on this market. This is done by a simultaneous equation model, taking the interplay of supply and demand side variables explicitly into consideration. Results from first 3SLS estimations suggest that both endogenous variables are negatively interrelated and determined simultaneously. On the demand side, average freight rate levels as a market outcome are significantly specified by slot utilization, charter rates, exchange rates and the freight rate of the opposite direction, while there is reason to believe that the cost structure of container carriers might affect the demand equation as well. On the supply side, however, the coefficient of determination suggests that ship capacities are sufficiently specified by new building prices, demolition prices, goods demanded, bunker surcharges and the price of opposite direction. Finally, comparing eastbound and westbound trades the sample shows clearly the impacts of persistent trade imbalances on freight pricing behaviour.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Unpublished lecture
Language English
Title Investigation of container shipping freight rate determinants on the transpacific trade lane - a simultaneous equation model approach
Event Research Seminar at CBS
Location Copenhagen Business School, Copenhagen
Date Dec. 4, 2012

Associations

People
Schramm, Hans-Joachim (Details)
Auer, Alexander (Former researcher)
Organization
Institute for Multi-Level Governance and Development IN (Details)
Institute for Transport and Logistics Management (Details)
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