Three essays on ocean transportation industry : from the financial and economics perspectives

Abstract

Ocean transportation carries 80% of the global commodity trade by volume and is the indispensable transportation method over the world. This thesis investigates into the sea transportation from three closely related topics: bunker fuel market, shipping bond market and freight transportation of international trade cargo. In the first topic, we focus on dynamic interdependence and volatility spillovers across bunker fuel markets and shipping freight markets. This study firstly explores dynamic volatility spillovers across bunker fuel markets in shipping industry. Volatilities in bunker markets are measured by using the dynamic conditional correlation GARCH model. And then bunker volatility spillovers across markets are studied. Our analysis provides evidence of unidirectional volatility spillovers within Asian (European/American) region and across regions, and also documents that Singapore bunker market is a leading market in transmitting volatility within Asian region and across regions. Furthermore, we measure time-varying volatility spillover effects among Singapore bunker market and shipping freight markets, and between Singapore bunker spot and futures market. The results reveal information transmission and could assist market participants and stakeholders to adjust hedging strategies and minimize risks according to the interrelationships across markets. The second topic considers how shipping bond market impacts on shipbuilding market. We construct shipping credit spread as an indicator of shipping bond market. And we find that buoyant shipping credit spread in year t-2 has a negative effect on shipbuilding market in year t. Namely, it illustrates that in reality shipbuilding market would have two-year lagged reaction in response to changes in shipping bond market. Besides, it identifies whether the global financial crisis would make a difference in the effect of shipping credit spread on shipbuilding market. Furthermore, the mechanism behind our findings is that a rise of shipping credit spread increases financing costs, which reduces ship ordering and shipbuilding contracts. We document that shipping bond market is actually an identifiable channel that impacts on shipbuilding market through shipping credit spread and shipping credit supply. The third study investigates the effects of trade agreements and exporting and importing countries on sea transportation of international trade cargo, by using a regression model on dry bulk, liquid bulk, and other cargo sector. Different from previous studies, the transportation output examined is valued in ton-miles, the product of tonnage of cargo transport and distance. The empirical results suggest that the membership of WTO (NAFTA and CAFTA) mainly has a positive (negative) effect on seaborne transportation of the exporters and importers. The estimates have also identified that China, as a major importing country, negatively affects seaborne transportation. We suppose that that it might be resulted in by operational and logistic inefficiency in sea transportation in China. An important policy implication of this study is that policy makers and market participants could recognize global economic power of major countries on international transportation and then make their own corresponding decisions and regulations in transportation areas.