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Title: Econometric analyses of container shipping market and capacity development
Authors: Fan, Lixian
Degree: Ph.D.
Issue Date: 2011
Abstract: There has been a tremendous growth in international trade and the associated growth in containerized shipping in the last two decades. Coincide with this growth the container liner shipping market has become more volatile and concentrated. This is contributed by the uncertainties in the world economic development, and carriers' pursuit of scale economies and larger market shares. While these issues have attracted considerable attention in the container liner shipping industry, few studies focus on market fluctuations and the decision factors for liner companies’ capacity expansion. This motivated the research in this dissertation that consists of a dynamic market analysis, and an examination of carrier capacity expansion and ship investment behavior in the container liner shipping market. The dynamic market analysis models the fluctuation of the container freight rate using two dynamic equations: a price dynamic equation that is determined by market demand and supply, and a fleet capacity dynamic equation that models the behavior of profit-maximizing firms. These two dynamic equations are estimated using the world container shipping market statistics from 1980 to 2009, applying the method of three-stage least squares. The estimated parameters of the model are statistically significant, and the overall explanatory power of the model is above 78%. The short-term in-sample prediction of the model largely replicates the container shipping market fluctuation in terms of the fleet size dynamics and the freight rate fluctuation in the past 29 years. The prediction of the future market trend suggested that the container freight rate would start to recover from 2010, which indeed happened in the container shipping market. This is the first dynamic-economic model for container shipping market with high predication power.
The capacity expansion behavior of individual carriers are examined using a panel data set comprised of the capacity information of the top 100 liners in the world from 1999 to 2009. Among the top 10 carriers, companies with expanding market shares grow faster, while those with shrinking market shares expand slower. This suggests greater concentration in the future. Carriers in the top 20 list grow faster than the others when facing capacity expansions of all other carriers. Finally, the results also point to the rule of mergers and acquisitions in fueling company capacity growth. As the first study linking market concentration with the growth of individual carriers quantitatively, it can helps policy makers identify appropriate strategies to prevent market concentration and maintain a high level of economic efficiency in container shipping. Finally, this dissertation also explores the determinants of ship investment decisions as well as decisions of ship choice. Firms make a decision to invest or not, and then they select a specific ship. When carriers select a ship, they are found first to choose whether to invest a new or second-hand ship and then to choose the size of the ship. This research found that new ships are preferred to second-hand ones. However, when the shipbuilding lag is long, or the demand growth rate is high, this preference decreases. Larger new ships are preferred to smaller ones. For second-hand vessels, handysize is the most preferred ship size.
Subjects: Containerization -- Economic aspects.
Hong Kong Polytechnic University -- Dissertations
Pages: x, 154 leaves : ill. (some col.) ; 30 cm.
Appears in Collections:Thesis

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