Albert Veenstra

A CO-INTEGRATION APPROACH TO FORECASTING FREIGHT RATES IN THE DRY BULK SHIPPING SECTOR

In this paper, a vector autoregressive model is developed for a sample of ocean dry bulk freight rates. Although the series of freight rates are themselves found to be non-stationary, thus precluding the use of many modelling methodologies, evidence provided by cointegration tests points to the existence of stable long-term relationships between the series. An assessment of the forecasts derived from the model suggests that the specification of these long-term relationships does not improve the accuracy of short- or long-term forecasts. These results are interpreted as a corroboration of the efficient market hypothesis.

The term structure of ocean freight rates

This paper contains an empirical investigation of the relation between spot and period freight rates for the ocean dry bulk shipping market. This relation is commonly referred to as a term structure. This paper hypothesizes a present value model, expressing the period rate as expectations of future spot rates, to represent this relation. The present value model is estimated using a vector autoregressive modelling approach. Although formal tests on the vector autoregressive models reject a restriction imposed by the present value relation, alternative, informal, tests proposed in financial markets research show that there is, in fact, considerable evidence that the present value model provides a valid description of the relation between spot and period freight rates. The results in this paper, therefore, support the existence of a term structure in ocean freight rates.

A quantitative analysis of container vessel arrival planning strategies

In maritime container transport, the random nature of vessel arrival and terminal service processes often lead to significant handling delays and/or resource underutilization. Arrival planning strategies (APS) promise to mitigate such undesirable effects by managing the variance of the terminal arrival process, taking different cost components and situational dynamics into account. We present a quantitative arrival scheduling simulation to analyze contrasting APS, in order to identify promising strategy design directions. Results are presented for central and decentral strategies, under high and low fuel price regimes. The analysis results in significant quantitative and qualitative differences between the strategies.

Multivariate autoregressive models for forecasting seaborne trade flows

This paper contributes to the literature on forecasting seaborne trade flows by presenting multivariate autoregressive time series models that can be used to produce long-term forecasts. The models are applied to forecasting the trade flows of four commodity markets (crude oil, iron ore, grain and coal) on major trade routes. The empirical results indicate that the models can produce long-term seaborne trade flow estimates that have relatively small forecast errors.

The relationship between design and economic performance of ships

Success in the shipping industry depends to large extent on the quality of the main asset: the ship. The owner or operator will ask herself: do I have the right ship for a certain job, and what performance can I achieve with a given ship. The relationship between the specifications of the ship, which are fixed in the design stage, and the economic performance of the ship has received some attention, but most of the previous work lacks in the extent to which economic performance is measured or expressed. This paper describes an attempt to operationalize the concept of design for service in the maritime industry. The paper presents a lengthy review of previous work, which shows that some attention was devoted in the past to the relationship between economic and technical aspects of shipping. However, the ‘economics’ usually turned out to be simple cost calculations, instead of clear insight in costs and benefits of certain design decisions. The main variable for the shipowner to buy a ship, or to operate a ship on a certain route is earnings potential. The relation between technical specifications and earnings potential is fairly direct: desired earnings potential influences the design specifications, and the specification of the finished ship determine the earnings potential. The analysis in this paper shows that shipowners also consider cargo carrying capacity, speed and versatility, but no other, more detailed, design factors. Subsequently, we present the design for service framework for the shipping industry. This framework points the attention to a thorough service requirements analysis that drives the design stage. Finally, some preliminary work is presented on empirical studies that are currently developed in the Netherlands.

CHANGING OWNERSHIP STRUCTURES IN THE DUTCH FLEET

The new Dutch shipping policy has given rise to high expectation and curiosity in the world of shipping. This, together with the obvious difficulties of an ex-post study of the effectiveness of such innovative policy, has prompted the authors to take an interest in attempting to investigate changes in ownership of the Dutch fleet 2 years after the new policy has been introduced. To do this, a rather new concept of ‘flagging out’ has been adopted, which is interpreted as a process leading to different degrees of ‘foreignness’ in a shipping operation. In this paper, a method to structure is presented, and ownership information, and changes in it are presented, that are essentially based on the theory of stochastic processes. The data used is the Dutch fleet data, which includes information on the nationality of the flag, parent ownership and management over the period 1994–1998. The results yield interesting insights in the shifts in the ownership and operational structure of shipping companies induced by the new policy. In particular, they allow one to establish the origin of new vessels, in which stage of ownership/operation it is most likely that shifts occur, and to determine the relationship between the different stages of the ‘flagging out’ process. These results, thus, enable an evaluation of the areas in which the policy can be expected to yield results.

The Value of Information in Container Transport

Planning the transport of maritime containers from the seaport to final inland destinations is challenged by uncertainties regarding the time the container is released for further transport and the transit time from the port to its final destination. This paper assesses the value of information in container transport in terms of efficiency and reliability. The analysis uses a stylized single period model where a decision maker allocates released containers to two transport modes slow, low price, no flexible departure times versus fast, high price, flexible departure times and plans the departure time of the inflexible mode. We construct Pareto frontiers and the corresponding Pareto optimal decisions under various information scenarios and show that the Pareto frontiers move in a favorable direction when the level of information increases. The mathematical results are explained and illustrated by means of a numerical example involving barge transport. We also perform a sensitivity analysis and study the impact of erroneous information on efficiency and reliability based on a numerical analysis.

Economic analysis of a container terminal simulation

This paper describes a conceptual approach and presents a first study for analysing the economic performance of a container terminal design, using operational indicators. The study consists of the extension of an operational simulation model into a model allowing economic evaluation of the terminal in terms of cash flow generated. The concepts and preliminary results of the study are presented here. The paper argues that the integration of the economic evaluation into the simulation model might give rise to problems with aggregation, but will also lead to the development of a potentially very interesting tool that can be used to assess advanced operational and financial strategies, such as dynamic pricing.

The growth potential of container shipping on the Yangtze River

Despite the rapid economic growth in the Yangtze River Delta area, the Yangtze River itself is lagging behind as measured by the ratio of container volume to total freight volume. According to the Ministry of Communications’ statistics, more than 70% of cargoes generated in the Yangtze Valley are suitable for containerized transport, but, at this time, only a fraction of these cargoes are actually transported in containers on the Yangtze River. This paper investigates, in a structured way, what the bottlenecks for container transport are along the Yangtze. We look at the geography of the river and physical bottlenecks, the development of port capacity, the available container ship fleet and service networks along the Yangtze. As a final element, we estimate, for the first time, container flows along the Yangtze River. The analysis shows that there is no immediate capacity shortage in either ports or the fleet. The analysis also shows that current service networks are inefficient, and could carry up to twice as much cargo with the same amount of ships. In terms of physical barriers, the Nanjing Bridge turns out to be both a physical and an economic barrier. The Three Gorges Dam is not a bottleneck yet, but with the current growth of container traffic, it will be in the next few years.

Contributions to Maritime Economics - Zenon S. Zannetos, the Theory of Oil Tankship Rates

This paper discusses the importance of Zannetos’ 1966 book for the development of maritime economic thought. The main contributions of the book are recounted, and the empirical work in the book is reviewed. The analysis of the present paper is a citation research on the maritime economics literature that refers to the book. Of the 42 papers in the set, about one-third refers to the book in general. A total of 35 papers refer to one or more elements of the book, with an equal number of references to: (1) the term structure of freight rates; (2) the empirical findings on the form of the supply curve; and (3) on the verification of his results. The general conclusion of the citation analysis is that, apparently, a number of elements of his work are still very valid for current maritime economics thinking, while maritime economists have disregarded several other elements. The latter seems unjustified for some of the business structure observations that are made in the book, such as the notion that the ship is the firm, and the elasticity of expectations. The former observation is the basis for virtually all empirical work in maritime economics that is based on individual contract data (all freight rate analysis is of this nature), and the second is the basis for the analysis of investment behaviour in shipping, investigations of cyclicality and so on. Zannetos can definitely be seen as the initiator of the important field of term structure analysis in maritime economics. In addition to this, there are several topics in the 1966 book that are as yet unexplored, and deserve empirical scrutiny.