Container shipping: A market equilibrium perspective on freight rates formation post-Covid-19

Abstract

The unprecedented container shipping freight rate levels post-Covid-19 are studied in a stochastic dynamic partial equilibrium framework. The proposed container marked model is calibrated on annual aggregate data from the two recent decades. The observed freight rate levels in 2021 and 2022 match a switch of competitive equilibria from Bertrand to Cournot competition. Whereas increased costs and reduced productivity play a role in explaining freight rates, these factors alone appear not to be able to justify the high post-Covid-19 freight rate levels.