Ship Investment Research Articles

Interpretable, data-driven models for predicting shaft power, fuel consumption, and speed considering the effects of hull fouling and weather conditions

In response to the global call for action to reduce CO2 emissions, operational measures such as speed, route optimization, and hull cleaning play a significant role in the maritime industry. These measures can be implemented immediately without significant investment in both newbuilding ships and existing ships. To make accurate decisions regarding operational measures, reliable and precise models of environmental conditions and effects of hull fouling are required. In this study, a data-driven approach using linear regression was applied to predict shaft power, fuel consumption, and speed after intensive data preparation and feature engineering. First, a shaft power prediction model was developed by combining three independent submodels: the RPM-power model, hull fouling model, and environmental effect model. Subsequently, fuel consumption and speed prediction models were developed based on the shaft power prediction model. Model validation was performed on a 174K LNG carrier, and the results showed good accuracy even in long-term ship operations of more than two years. The mean absolute percentage errors (MAPEs) of the prediction models were 1.60%, 1.70%, and 2.68% for the shaft power, fuel consumption, and speed, respectively. The validated models were applied to two LNG carriers, and satisfactory results were obtained. This study contributes to greenhouse gas (GHS) reduction by providing interpretable, flexible, and accurate models that can help make correct decisions regarding optimal operational measures.

Stranded asset risk assessment on ship investments

The transition towards a low-carbon economy is crucial to achieve the Paris climate goals, but it also presents the risk of stranded assets across various industries. However, existing research has mainly focused on upstream and power sectors, leaving the stranded asset risk of individual assets less understood. This study proposes a real options-based framework for evaluating the stranding risk of carbon-intensive assets. To illustrate its practical application, we apply the framework to a fossil-fuel-powered bulk carrier. The results show that under carbon pricing, the shipowner should expect to bear approximately US$26.5 million of stranded asset risk, which would decrease to US$25.2 million if the ship reduces speed to comply with carbon intensity regulations. We conclude that our framework will enable an adequate assessment of these risks, leading to more practical implications for investment decision-making and supporting climate risk management.

Container ship investment Decisions―Newbuilding vs second-hand vessels

Ship investment is a crucial strategic issue for shipping companies as the container shipping industry is highly capital-intensive. In practice, a company's ship investment decision mainly concerns new shipbuilding and second-hand vessels. The investment of new container ships with advanced technology is high in cost and the payback period is long. Differently, the second-hand vessels' investment cycle is shorter, but there are certain drawbacks in loading capacity and maintenance. Therefore, it is significant to investigate the investment selection of new-building and second-hand ships in the container shipping market. Previous studies have analyzed this topic at aggregate or industry level. Few studies have attempted to reveal ship type preferences from observed individual data. Therefore, using the data from the Clarkson's World Fleet Register between 2000 and 2021, this study employs the Nested Logit model to analyze the container ship investment preferences, and explore the impact of different variables on decision-making from the perspective of individual companies. The empirical results suggest the higher substitution effect among alternatives within the same nest than that of crossing nests. Along with discussion on the effects of various factors, it discloses the higher preferences of larger types of vessels in responding to competitors' capacity expansion, especially the larger companies. Therefore, it is important to distinguish the larger companies' capacity expansion between responding to demand and competing with competitors, especially for those companies adopting follower strategies.

Investment Project Analysis of a Medium Range (MR) Tanker Ships Purchase in an Attempt to Maintain the Economic Productivity of the Company (Case Study: PT XYZ)

PT. XYZ is a spin-off charter out business of its host company that specifically focuses on providing charter out services in the shipping industry. This research was carried out in response to the requirement to rejuvenate the vessels owned by PT XYZ taking into consideration the age of the ships. In total, there will be 7 ships that was used as an object of this research, considering the replacement program options of either acquiring newbuild vessels or secondhand ships. Newbuild Ship investment will use a 9.09% hurdle rate, including the weighted average cost of capital (WACC) of 7.09% and a risk premium of 2% in the analysis. This hurdle rate will be used as comparative data to the required rate of return for the related project (IRR>Hurdle Rate). There is a total of 2 ship in the overall project that will be replaced with a newbuild ship, Project 1 and Project 2. These investment projects will be conducted from 2024-2026 period. The capital structure for newbuild projects consisted of 75% debt and 25% equity. Secondhand ship investment will use an 9.59% hurdle rate, including the weighted average cost of capital (WACC) of 7.09% and a risk premium of 2.5% in the analysis. There is a total of 5 ships in the overall project that will be replaced with secondhand ship, Project 3-7. These investment projects will be conducted from 2024-2026 period. The capital structure for secondhand projects consisted of 75% debt and 25% equity. Based on the financial assessments of the projects, the findings consistently demonstrate positive results. As a result, it can be inferred that the seven projects are both viable and feasible to undertake. The primary objective is to guarantee that these projects make a positive contribution to the company’s economic productivity.

A stochastic approach for economic valuation of alternative fuels: The case of container ship investments

With unpredictable climate policies and fuel technology developments, the maritime industry faces significant uncertainties. This study presents a stochastic approach to assess investments in container ships powered by three types of fuel in the context of carbon pricing: Low sulfur fuel oil (LSFO), liquefied natural gas (LNG), and ammonia. To analyse uncertainty, we model carbon permit and bunker prices stochastically, and presented probabilistic functions of the net present value (NPV) and the energy density adjusted levelised cost of energy (LCOE). The results suggest that with carbon pricing the chance of LNG to be more profitable than LSFO increases, while the ammonia-fuelled ship exhibits the least expected NPV with the widest distribution in all carbon pricing scenarios. Fossil fuels are more advantageous in generating a lower cost of power, both with and without carbon pricing. Consequently, our findings suggest that carbon pricing alone will not be sufficient to facilitate a transition to ammonia. Furthermore, various measures to mitigate the uncertainties associated with ammonia fuel would be required, including the development of infrastructure to ensure a stable fuel supply.

Research on Price Evaluation of Second-hand Container Ship based on GA-BP Neural Network

As a capital investment, whether the investment in second-hand container ships can bring benefits to the enterprise depends on whether the benefits of ship operation can repay the investment and obtain certain profits. The purchase price of second-hand ships is the key factor, so an evaluation model is built to predict the price of second-hand container ships and evaluate its rationality. To help enterprises better understand the actual price of ships when buying and selling ships, and hope to improve the market evaluation system. In order to accurately evaluate the price of second-hand ships, the Clarkson database was used to obtain 362 container ship transaction data from December 2019 to December 2022, and a GA-BP network neural model based on ship age, deadweight tonnage and new shipbuilding price was established. The weights and thresholds were optimized through genetic algorithms, and then assigned to the BP neural model. The test results show that the mean square error is 0.0185, the evaluation error is basically 20%, and the error within 10% accounts for nearly half. It is proved that the model can preliminarily evaluate the transaction price of second-hand ships, and has certain feasibility and rationality.

Analysis of fleet deployment in the international container shipping market using simultaneous equations modelling

ABSTRACT The shipping industry is a capital-intensive industry in which ship investment and demolition are directly related to the company’s profitability, transportation capacity, and fleet structure. Thus, companies need to consider investment and demolition activities carefully before making decisions about fleet deployment. This study focuses on decisions related to investment in new and second-hand vessels as well as vessel demolition in different sub-markets of the container shipping market at the same time. By considering market factors, operating conditions, and shipping alliances, we developed a systematic model for the container market. This model innovatively employs a simultaneous equations model (SEM) to analyze fleet deployment decisions and uses the three-stage least squares method to avoid endogenous effects. The results indicate that shipping alliances, fleet deployment, and bunker price all have significant effects on the investment and demolition decisions of shipping companies. We further discuss the strategic decisions of shipping companies related to joining shipping alliances and highlight the considerations of larger companies when expanding (primarily squeezing out competition and responding to the market). The results provide valuable information for shipping companies to determine the best ship deployment strategies and avoid overcapacity.

Ship-type preferences of newbuildings in the dry bulk market

New ship investment, especially the ship-type choice decision is an important strategy for companies in the highly competitive dry bulk market. This study tries to investigate the impacts of various factors on the ship-type preferences for different shipping companies. Through literature review and discussion, it proposes three hypotheses to investigate the effects of market and operational, company strategy and industrial clustering factors on the ship-type preferences for dry bulk ships. Using observed companies' investment data 2000 to 2019, the multinomial logit model (MNL) is deployed to analyze the incentives of ship-type selection. The empirical results show that the above three factors all impact the companies ship-type preferences. The industrial clustering factor leads to the preferences of medium-size vessels built in China and Japan and larger ships in European and America. With respect to the effect of company strategies, larger companies react more intensely to the changes of their market shares as they are more capable in investing in larger vessels in responding to its market share changes. The market and operational factors also incur different effects on the ship-type preferences. It is interesting that demand and freight rates positively impact the companies' preferences of the Panamax ship type as it can incorporate the economies of scale and accessibility to most of the ports in the world. The detailed insights provided by this study into the choice behavior of companies in different market conditions and competitive environments can help dry bulk companies to make decisions suitable for maintaining or expanding their market shares as needed, so as to formulate a more scientific, reasonable and sustainable investment and development plan.

Autonomous ship concept evaluation – Quantification of competitiveness and societal impact

The prospect of large-scale international adoption of autonomous ships has led to expectations of reduced costs and emissions for waterborne transport of goods. This is commonly attributed to the possibility of removing manning from the ship, which enables more efficient ship designs and reduced operational costs. So why have we not seen a multitude of autonomous ship building projects? There are several reasons for this, including immature technology and regulations. However, there is another reason which has received less attention; the lack of quantifiable evidence for the benefits arising from investing in autonomous ships. There are some case studies on the impact of autonomy on transport cost, but there is no established method for evaluating the effects of an investment in autonomous ships. This paper will present Key Performance Indicators (KPIs) developed to enable such quantification. Furthermore, the developed KPIs are chosen not only to enable quantification of benefits but also to be calculable based on data which it is reasonable to assume that are available or obtainable at a concept stage.

정기선 해운기업 선박투자 행태분석에 관한 실증연구

This study analyzed the ship investment behavior of Korean liners before the bankruptcy of Hanjin Shipping in 2017 by dividing them into investment in new ships and charter ships. In the case of newbuilding investment, the ship investment behavior of global liners was measured in the boom period of 2003-2008 (6 years), the recession period of 2009-2014 (6 years), the recent 2015-2016 (2 years), the low newbuilding priced period, and the high newbuilding priced period. 2006-2007 (2 years) were analyzed. In the case of charter investment, the charter investment behavior of global liner companies for 10 years from 2007 to 2016 was analyzed and compared with major global shipping companies. As a result of the analysis, it was evaluated that Hanjin Shipping and Hyundai Merchant Marine (currently HMM) showed lower performance compared to global liner companies in terms of investment in new shipbuilding and charter ships, as they placed orders during the period of high ship prices and high charter rates, and the proportion of long-term chartered ships was high. This investment behavior affected Hanjin Shipping’s bankruptcy, and it is estimated that it acted as a financial burden on Hyundai Merchant Marine. It is expected that this study will provide useful information in terms of timing and strategy for ship investment by shipping companies in the future, and it is expected that it will have a great potential for use in establishing government policies.

Evaluation of various fuel alternatives in terms of sustainability for the ship investment decision using single valued neutrosophic numbers with TOPSIS methods

IMO has introduced regulations to improve fuel quality in the sector to reduce emissions from ships carrying the vast majority of world trade. As a result of these regulations, which were planned gradually, carbon-neutral shipping was targeted. In line with this goal, it was seen that ship operating companies tend to various alternatives to increase fuel quality. This study evaluated various fuel alternatives for ship investment decisions by employing the Technique for Order Preference By Similarity to Ideal Solution (TOPSIS) method under the Single Valued Neutrosophic Sets (SVNS) in terms of sustainability aspects. First, criteria that are specific to the ship investment decision under the aspects of sustainability and their weights were determined. Then, these weights were placed in the model to determine the most sustainable ship fuel produced within the scope of the study. Finally, alternatives determined in terms of fuel type, which is one of the items to be decided on ship investment, were listed according to their degree of sustainability. According to the findings, dual fuel and bio-fuel were selected as more sustainable bunker fuels for today. Technically, findings were evaluated, and the pros and cons of the related bunker fuels were revealed. In the light of the findings, evaluations were made on alternatives.

A Study on the Development Priority of Smart Shipping Items—Focusing on the Expert Survey

As smart technology in the shipping industry accelerates, demand for technology development, which aims to increase competitiveness by utilizing the latest smart technologies, is increasing. The shipping industry in each country is pushing for developing its smart technologies at a rapid pace, and it is urgent to prioritize the demand for smart technologies in the shipping industry for sustainable industry growth. The purpose of the present study is to verify the importance and urgency of smart technologies in the shipping industry, and the present study surveys 74 domestic and foreign shipping industry officials, covering shipping companies, brokers, governments, etc. The importance and urgency of each smart technology item in the shipping industry are questioned in a survey. It is necessary to focus investment on specific smart shipping items under a limited budget, and, since the priorities presented in this study were derived through comprehensive collection of opinions from 74 shipping experts, the priorities presented in this study are expected to be effective reference values when implementing sustainable shipping investment policies. According to an interview analysis on importance and urgency, both “autonomous ships” and “blockchain” items show high importance and urgency. Since both importance and urgency are high, strategic priorities are the highest, and it is expected to contribute effectively to enhancing the smartness of the shipping industry when it focuses its investment capabilities in those fields.

Optimization of fleet structure and investment evaluation – the cargo owner's fleet perspective

PurposeEnergy groups are cargo owners with large amounts of energy sources (such as coal) to transport. To achieve a satisfactory tradeoff between the reliability requirements of the sea transportation process and the need to control the investment cost, they usually set up a self-owned fleet supplemented by a chartered fleet. This paper aims to investigate the best fleet structure and to evaluate the investment scheme under volatile circumstances in the shipping market.Design/methodology/approachThe authors construct a mathematical model to determine the ratio of the self-owned fleet to the total fleet to minimize fleet operating costs. The volatility of both freight rates and oil prices is taken into consideration. The CPLEX solver is used to empirically analyze real data from an energy group in China, and the ship investment plan is evaluated considering the technical and economic feasibility.FindingsIf the ratio of the self-owned fleet to the total fleet is increased to the optimal of 90.40%, the total operating cost is reduced by 33.98%. Thus, the energy group should increase its capacity with a Panamax vessel of approximately 82,000 DWT. Purchasing a 5-year-old secondhand ship and building a new ship both have good investment return indicators.Originality/valueFor cargo owners engaging in transporting bulk cargo domestically in China, the suggested fleet ratio can provide a reference with a universal application scale, given the boundary economic conditions (including the volatility of freight rates and oil prices in the shipping market) in the paper.

Studi pendapatan pejala rumpon di Manggar Baru Balikpapan

Rumpon is a type of fish trap. The catch depends on the application technique. The depth in applying this gear has been recognized as the main issue for the total catch. The purpose of this study were (1) to find total user of rumpon in Manggar Baru, (2) to identify the investment value of rumpon (3) to analyze income of pejala rumpon. The research was conducted using census methods from population. Profit analysis and statistic descriptive analysis were employed to calculation investment and unprofitably. The results shown (1) The uses of rumpon increased production from one trip shorter operation, it resulted profit full operational budget, (2) investment of rumpon in Manggar Baru is Rp. 11,410,000/rumpon, ship investment is between Rp. 17.5 million-Rp. 20 million, machine Rp. 4.4 million and jala Rp. 8 million, (3) The income rumpon owner of per month is about Rp. 5.2 millions per rumpon, ship owner Rp. 2.6 millions and rumpon owner Rp. 2.6 millions and the members has Rp. 2.6 millions per rumpon, it will be higher income if fisherman also fished with other fishing gear in the same time. It is predicted that the addition income will be Rp. 500,000-Rp.1.5 millions per fisherman.

Disentangling demand and supply shocks in the shipping freight market: their impact on shipping investments

ABSTRACT We show that demand shocks have a greater effect on real freight rates compared to supply (fleet) shocks both historically and on impact. By contrast, supply shocks have a larger impact on net contracting activity when compared to demand shocks. This paper disentangles for the first time demand and supply shocks driving shipping freight markets and assesses their impact on net contracting activity, a key measure of shipping investments. In the process, we construct novel indices of demand for shipping transportation. Policy-related issues are quantified through drawing forecast scenarios for the response of real freight rates to unexpected demand and supply changes. (R41), (E32).

Assessment of investment decisions in bulk shipping through fuzzy real options analysis

The global shipping market has been depressed and turbulent since 2008. Shipping companies have had to be more cautious with their investments, so as to buck the trend and get through this difficult period. Traditional net present value methods cannot help enterprises make effective investment decisions. Therefore, we employ real options theory—including expansion options, contraction options, deferral options, and abandonment options—to simulate various types of operational adjustment strategies used by investors in the process of ship investment and operations. Triangular fuzzy numbers and the generalized autoregressive conditional heteroscedasticity model are also introduced to describe the uncertainty and volatility of the shipping market. Subsequently, a fuzzy real options binomial tree pricing model is developed to assess the project value of ship investments. Based on the calculations and analysis of an actual ship investment case, the fuzzy real options method is shown to be more suitable for ship investment analysis, fitting more closely the actual market and operating situation.

What moves shipping markets?: A variance decomposition of price–charter ratios

ABSTRACT This paper studies the dynamic relationship between ship prices and operating profits by using the fact that these two factors are cointegrated. To conduct an empirical analysis, we select Panamax 76K 5-year second-hand prices and 1-year time charter rates, and then define their linear combination as a log price–charter ratio. We find that almost all variations in price–charter ratios correspond to changing expectations about future returns. This finding implies that the mean reversion in price–charter ratios arises mainly from ship prices as prices tend to move toward operating profits. The implication is that price–charter ratios can be used to schedule ship investment timing. When unexpected down-side risks occur, one preemptive action to minimize additional losses is to lower vessel exposure right away before ship prices plummet in accordance with movements in the freight market.

The Importance of Maritime Transport for Economic Growth in the European Union: A Panel Data Analysis

Maritime transport is one of the main activities of the blue economy, which plays an important role in the EU. In this paper, we aim to assess the impact of maritime transport, related investment, and air pollution on economic growth within 20 countries of the European Union, using eight panel data regression models from 2007 to 2018. Our results confirm that maritime transport, air pollutants (NOx and SO2) from maritime transport, and investment in maritime port infrastructure are indeed positively correlated with economic growth. In other words, an increase of 10% in these factors has generated an associated increase in economic growth rate of around 1.6%, 0.4%, 0.8%, and 0.7% respectively. Alongside the intensity of economic maritime activities, pollution is positively correlated with economic growth, and thus it is recommended that policymakers and other involved stakeholders act to diminish environmental impacts in this sector using green investment in port infrastructure and ecological ships, in accordance with the current European trends and concerns.

An evaluation of ship investment in interval type-2 fuzzy environment

Investment is one of the most crucial factors for a company. The decisions that a company makes in an investment uncertainty environment with high global competition, such as in the shipping industry, affects the life of the company either positively or negatively. Therefore, correct decision-making is extremely important particularly in an environment of investment uncertainty. Fuzzy set theory can be used to represent uncertainty and vagueness to generate decisions in decision-making problems. In this study, the aim is to evaluate ship investment by means of Net Present Value (NPV), Profitability Index (PI), and Payback Period (PP) under the Trapezoidal Interval Type-2 Fuzzy environment. In addition, two methods, Interval Type-2 Fuzzy Payback Period (IT2FPP) and Interval Type-2 Fuzzy Profitability Index (IT2FPI), were developed for the first time in the literature by integrating Interval Type-2 Fuzzy with traditional methods. These methods were then successfully applied to a real case study of ship investment for evaluation in the shipping industry in an uncertain environment.

An investigation on behavioral biases in ship investments of small-sized shipping companies

Purpose This study aims to explain the facts about behavioral biases that cannot be explained by rational patterns in ship investments of small-size shipping companies. Design/methodology/approach A qualitative approach was adopted in this study. The systematic approach of Wolcott (1994) and the action flows proposed by Miles and Huberman (1994) were taken into consideration. Findings Factors affecting ship investments are classified as ship finance, market timing, ship specifications and profile and business models of ship investors. In addition, behavioral biases that stand out under each theme are explained in the light of behavioral finance literature. Originality/value The originality of this study rests on the lack of studies on behavioral aspects of ship investments.