Quotation Schramm, Hans-Joachim, Auer, Alexander. 2013. Investigation of container Shipping Freight Rate Determinants on the Transpacific Tradelane - A Simultaneous Equation Model Approach. LRN Annual Conference 2013, Birmingham, Gro├čbritannien, 04.09.-06.09.


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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 this paper is to investigate price and quantity determinants of freight rates and shipping capacities, exemplified in the case of the transpacific trade lane between Far East and North America (i.e. USA and Canada). Taking a sample of 12 different variables with quarterly data between 1996 and 2009 our aim is to sort out the interdependencies of freight rate levels and shipping capacities on trade lane level from a medium to long run perspective. This is done by estimation of a simultaneous equation model, taking the interplay of supply and demand side variables explicitly into consideration. Results from 3SLS estimations suggest that both endogenous variables average freight rate per TEU and quantities supplies in TEU are negatively interrelated and determined simultaneously. On the demand side, average freight rate levels as a market outcome are significantly specified by a constant base rate, quantity supplied in TEU, charter rates and the freight rate of the opposite direction with slot utilization added on westbound trades. On the supply side, the coefficient of determination suggests that ship capacities are sufficiently specified by average freight rate per TEU, quantities demanded in TEU and new building prices but not by demolition prices and bunker surcharges. Finally, comparing eastbound and westbound trades the sample shows clearly the impacts of persistent trade imbalances on freight pricing behaviour. Simultaneous supply-demand modelling offers a chance to dissolve the puzzling interplay between supply and demand in connection with persistent trade imbalances in container shipping.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Investigation of container Shipping Freight Rate Determinants on the Transpacific Tradelane - A Simultaneous Equation Model Approach
Event LRN Annual Conference 2013
Year 2013
Date 04.09.-06.09.
Country United Kingdom
Location Birmingham
URL http://www.lrn2013.org.uk/

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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