The Analysis of Tanker Shipping Market and Factors Affecting Freight Rate

Demand for Maritime transportation is derived from International transactions between countries. Hence, in this research in addition to Scrapping tanker price, freight rate determinants such as new-building and second-hand tanker price, the role of seaborne trade is considered. To study the tanker market, we used data between 1987 and 2010, extracted from the Clarkson Research Studies. As causality was not predetermined, in order to discover a co-integration relation and causality direction, a VAR and VECM is applied following appropriate Unit root tests. According to results, unlike short run dynamics, new-building and second-hand tanker price and seaborne trade volume have affected freight rate in long run. Moreover, in short run, freight rate, seaborne trade volume and second-hand tanker price affect new-building price. Finally, the increase in seaborne trade volume, after one period adjustment, tends to increase in freight rate. This impact is temporary.