PYXIDA Institutional Repository
and Digital Library
Collections :

Title :Investments cycles in the shipping industry and their relation to commodity and trade volume forecasts
Creator :Efstathiou, Nikolaos
Contributor :Vettas, Nikolaos (Επιβλέπων καθηγητής)
Athens University of Economics and Business, Department of Economics (Degree granting institution)
Type :Text
Extent :82p.
Language :en
Abstract :This thesis studies investments cycles in shipping industry and their relation to commodity and trade volume forecasts. Shipping plays a central part in the global economy, and its well-documented history, stretching back for 5,000 years, gives maritime economists a unique perspective on the way the industry‘s economic mechanisms and institutions have evolved. Shipping lays the foundation for the development of the maritime industry and the change in market structures and industry production structure. It is a business that evolved along with the world economy, exploring and exploiting the ebb and flow of trade. Today‘s trading world has gradually evolved over many centuries and history demonstrates the regional center of sea trade is constantly on the move (chapter 1).Because shipping is a service business, ship demand for vessels depends on several factors, including price, speed, reliability and security. It starts from the volume of trade, and how trade of commodities can be analyzed by dividing them into groups which share economic characteristics, such as energy, agricultural trades, metal industry trades, forest products trades and other industrial manufactures. To meet marginal fluctuations in demand, or for trades such as grain, where the quantities and routes over which cargo will be transported are unpredictable, tonnage is drawn from the charter market. To this end, an overview of the market will be given, covering the transport system, the demand for sea transport, the merchant fleet, how transport is provided, the role of ports, shipping company organization and political influences (chapter 2).Market cycles are the central economic characteristic in the shipping market. A discussion of the characteristics of shipping cycles leads on to a review of how experts have explained the shipping cycle. We start the analysis with the characteristics of cycles, identifying the secular trend, short cycles and seasonal cycles. Then we proceed to define shipping risk. This is the risk that the investment in the hull of a merchant ship, including the return on the capital employed, is not recovered during a period of ownership (chapter 3).A brief account of each cycle is provided, drawing attention to the economic mechanism which drove the market up or down and the underlying secular trend. Each cycle is developed within a framework of supply and demand, so common features such as cycles in the economy and over-ordering of ships emerge again and again. As a rule, supply has no difficulty keeping up with demand, so the big freight ‗booms‘ are often the result of unexpected events (chapter 4). The rapid expansion of import trade, matched by a corresponding export trade in primary produce or simple manufactures to pay for the imports. Whilst the early stages favor the bulk shipping business, when the economy reaches maturity, the liner business gains from the almost unlimited potential for shipping components and finished goods between developed markets. Shipping depends on trade, so it must be understood at some depth why countries trade and why certain trading patterns change. First, a discussion of the trade theory is presented, identifying the various explanations for trade, followed by the supply–demand model used to analyze natural resource based commodity trades (chapter 5).The range of maritime business activities which require forecasts is extraordinarily wide, particularly if we take into account the activities of banks, governments, port authorities, shippers and other organizations with an interest in the shipping market. Decision makers need to decide what the best thing to do is, and this requires analysis and forecasting. The ‗forecasting paradox‘ is that businessmen do not really expect forecasts to be correct, yet they continue to use them (chapter 6).There are two different types of ‗forecasts‘ used in the shipping industry: market forecasts and market research. Market forecasts cover the market in general, whilst market research applies to a specific decision. Different techniques are discussed covering each type of study. Since forecasters are only called on to predict things which are unpredictable, they must be expected to be wrong. Their task is not to predict precisely, it is to help decision-makers to reduce uncertainty by obtaining and analyzing the right information about the present and show how that information can help to understand the future. All forecast analyses should satisfy three simple criteria: they should be relevant to the decision for which they are required; they should be rational in the sense that the conclusion should be based upon a consistent line of argument; and they should be based upon research at a significant level of detail (chapter 7).The relation between commodities and the cycle is stronger for industrial commodities. This affects the historical relationship in the sense that commodity futures indices need more weighted toward agriculturals in the decades prior to the 1990s. The correlation between stocks and commodities is higher during periods of economic weakness. This is consistent with recession-increased risk aversion causing investors to treat all risky assets the same, and with firms adjusting input use more quickly during tough times. The relation between correlation and the cycle is stronger for industrial commodities (chapter 8).
Subject :Investments cycles
Shipping industry
Commodity trade
Maritime forecasting
Market forecasting methodologies
Date :20-03-2017
Licence :

File: Efstathiou_2017.pdf

Type: application/pdf