Forecasting Shipping Market
Effects of Global Economy on tanker’s freight rate
The global economy has witnessed rapid changes in the last few decades. Barriers that have hindered the free flow of goods, services and capital are gradually being removed, while countries that were initially opposed to liberal economic policies are now beginning to adopt them. These developments suggest that the world is shifting towards an economic system that will be more beneficial for international business. This global economic advancement also comes with unprecedented economic risks, some of which have been aggravated by the breakdown of the Bretton Woods agreement, incessant fluctuations in interest rates and oil price shocks
The business of shipping is highly capital intensive and often financed by debt. Therefore, an increase in interest rates will have a negative effect on the value of the firm. But a further attribute is that given an international financial market for shipping companies, loans can be chosen from a selection of currencies. When dollar loans are raised, for example, the dollar interest can be offset against the dollar revenues, net of dollar-denominated labour costs, which again provide a natural hedge. Clearly, the hedge is far from perfect, but this nevertheless suggests a lower exchange rate risk than would otherwise be the case. Furthermore, differences in forwarding versus spot exchange rates can reflect underlying differences in interest rates across currencies. It follows that an investigation of exchange rates should also encapsulate interest rates, which we attempt to survey the effect on shipping freight rate.
When the data is reviewed to draw the general framework of the study, previous studies examining a similar relationship before couldn’t reach such a deep relationship between economic factors and tanker freight rate. The framework of Soshianest Enterprise Miner (SEM) is created in a way which makes approaching from other angles possible. Due to its structure, demand for maritime transportation is derived from economic activities. So, it is a reflection of the economic activities in the country. The purpose of this SEM is to examine the impact of some economics indicator variables on the shipping freight rate. To establish the theoretical relationship between these variables, the studies examining the macro variables affecting the stock market and the contribution of the stock market to economic growth are examined. If the stock market is affected by macro variables representing economic activities, or if it is related to economic growth, the hypothesis that it represents the demand for shipping will be based on stronger foundations.
- These are some conclusion that has been extracted from deep analysis obtained from SEM’s index computations: .
- In the analysis of economic indicators, we found that the values of the UK Exchange Rate and Germany Exchange Rate have a significant impact on oil tanker freight rate. The effect of this index is also evident with a lag of 2 and 3 years.
- In terms of economic indicators, the GDP indices of China, India and Indonesia have the greatest impact on freight rate.
- The German / Euro Interest Rates index with a 4-year lag has a significant impact on freight rate.
Forecasting shipping market