Tanker Shipping Research Articles

The dynamic relationship between tanker freight rates and crude oil production: evidence from causality analysis

This paper studies the dynamics between tanker freight rate and crude oil production levels. Making use of the Toda and Yamamoto (1995) procedure, it is tested for the (non-)existence of Granger (1969) causal relationships between the two variables. Over the sample period from 1998 to 2014, the results suggest that past information of crude oil production levels uni-directionally helps to predict current tanker freight rate levels. This holds both for aggregated global data and for specific trading routes. Moreover, making use of breakpoint analysis, it is found that this causal relationship is only valid until 2009, since when the global tanker shipping market suffers strongly from excess tonnage capacity. During periods of low earnings in the tanker market, freight rate levels are not impacted by changes in crude oil production. At the practical level, the findings imply that, depending on the state of the freight market, ship owners and operators may improve chartering decision-making by monitoring physical crude oil production volumes.

Indirect Growth Rates of the Information Model for the Global Tanker Shipping Market from 2010 to 2020

This paper examines indirect growth rates of the global tanker shipping market over the period 2010 – 2020. The evaluation and analysis of the relevant variables of the model and the resulting indirect growth rates have been aimed at a scientific formulation of the research findings and have been used to describe the most important theoretical principles governing the worldwide tanker shipping market over the observed period of time. The basic hypothesis has been confirmed through the indirect growth rates of the selected model variables. In this way a scientific confirmation of the hypothesis has been provided: “On the basis of scientific insights into the global tanker shipping market, it is possible to calculate the indirect growth rates of the information model for the global tanker shipping market for the period from 2010 to 2020.”

Fleet replacement decisions under demand and fuel price uncertainties

This paper proposes a real option model to investigate the fleet replacement timing decisions when a shipowner faces uncertain demand on various routes and uncertain fuel prices (both MGO and LNG prices). A multi-option least squares Monte Carlo simulation algorithm is utilized to find the replacement probabilities in future years and the expected NPVs of the cost savings after the replacement. The proposed model is applied to a chemical tanker shipping company. The case results indicate that the shipowner should replace all of his diesel-fuelled vessels with dual-fuelled vessels at one time, rather than replacing them one-by-one. Moreover, we compare the performance of two possible government policies, the vessel subsidy policy and the fuel subsidy policy. The sensitivity analysis indicates that in our case, the shipowner prefers the vessel subsidy policy, which brings him more cost-savings and allows him to make the earlier replacement decision. Alternately, the fuel subsidy policy is suitable for routes with a larger turnover volume if governments wish to see the more obvious policy feedbacks.

Buyer-driven greening? Cargo-owners and environmental upgrading in maritime shipping

In this article, we examine the relations between global value chain governance and environmental upgrading in maritime shipping. Drawing from interviews with global shipping companies and major buyers of shipping services (cargo-owners), we reveal the key issues and challenges faced in improving the environmental performance of maritime transportation. Contributing to the Global Value Chain (GVC) literature, we compare and analyze the influence of three main external drivers on environmental upgrading in the tanker, bulk and container shipping segments: regulation, cooperation and buyer demands. Our findings suggest that environmental upgrading is more likely to occur when global value chains are characterized by unipolar governance and where the lead firms are consumer-facing companies with reputational risks. Furthermore, environmental upgrading in shipping is not likely to materialize without clear and enforceable global regulation and stronger alignment between regulation and voluntary sustainability initiatives.

English

English

AN ANALYSIS OF THE EFFECTS OF MAJOR OIL COMPANIES ON CREW SELECTION CRITERIA FOR TANKER OPERATING SHIP MANAGEMENT COMPANIES

Tanker shipping which is a special sub-sector of maritime transportation industry plays an important role for the world trade. As oil and its derivatives transported by tankers is the fundamental component for developing industries, its transportation becomes an indispensable issue. Though petroleum and chemical transportation is important for all industries, due to its structural properties, these cargoes include major risks for the environment. There have been some enforcement and impositions to the tanker operating ship management companies to minimize these risks. Herein, MOC (Major Oil Companies), the most important players in the world petroleum industry, has made such impositions on tanker operating ship management companies. Enforcement and impositions on human factor which is the most significant element in a business has a critical importance to minimize these risks. Thus, this study aims to reveal the effects of MOC on the personnel selection criteria of the ship management companies that operate tankers. To achieve this aim, a total of 12 companies operating in Turkey and having largest fleet were selected. An interview was conducted through these companies and the data obtained were analyzed by content analysis of qualitative research methods. As a result, it is revealed that major oil companies have an impact on personnel selection process and activities. Generally, these effects have been about duration of the contract, the number of crew required to be on board, company internal promotion procedures, recruitment process of new employees to the company, and crew training.

Fuzzy and grey theories in failure mode and effect analysis for tanker equipment failure prediction

Failure Mode and Effects Analysis (FMEA) has been extensively used for examining potential failures in many industries. Unlike the traditional FMEA, the risk factors of occurrence (O), severity (S) and detection (D) of each failure mode are evaluated by linguistic terms and fuzzy ratings in this research, and their relative weights are considered, which make the results more useful and practical. Both grey theory and fuzzy theory are applied in FMEA, in which fuzzy set theory is used to calculate the fuzzy risk priority numbers (FRPNs), and grey theory is applied to calculate the grey relational coefficient. The rankings of the failure modes are both determined by FRPNs and the grey theory. An example of oil tanker equipment failure is provided, and the results show that the evaluation of failure modes by both fuzzy theory and grey theory are quite similar. The practical application of fuzzy and grey theories proposed in this paper helps to enhance the reliability of the prediction, and the predicted ranking of equipment failure can be used for better decision-making concerning inspection and maintenance, which in turn will make tanker shipping more safe and reliable.

The Worldwide Tanker Shipping Market (2010 – 2020) Information Model

The aim of this paper is to provide the information model for the worldwide tanker shipping market 2010 – 2020. The evaluation and analysis of the relevant variables of the model and the resulting growth rates are used to describe the most important theoretical principles of the worldwide tanker shipping market over the observed period of time. The research produced direct growth rates of the variables on the index scale from 1 to 100: 1. Innovations in maritime shipping (37.5), 2. Global economy (25.0), 3. Shipbuilding (14.3). 4. Globalisation (12.5) and 5. Freight rates (12.5). It can be concluded that the direct growth rates of all model variables of the worldwide tanker shipping market 2010 – 2020 have realistic chances to be implemented. By 2020 it is expected that the demand on the tanker shipping market will increase more intensely than the demand in other trades.

Economic performance and corporate financial management of shipping firms

In an increasingly competitive environment, the importance of the economic performance of the maritime sector has been emphasized in the research of the past two decades. Recently, shipping firms have increasingly entered stock markets as an alternative source of finance, avoiding thus excessive debt exposure. It is here considered necessary to use performance measures which combine shareholders’ values with aspects of organizational management. Economic Value Added and Tobin’s Q are used to evaluate the economics performance of shipping firms. Main elements of financial management are used to investigate the determinants of economic performance of shipping companies. 64 international shipping companies listed in Bloomberg Shipping Indices are included in our sample. A panel regression is used to examine the impact of financial strategies on performance, across three market segments. This analysis provides shipping companies with managerial and strategic insights on how financial options influence economic performance. We identify unique common performance-determining characteristics such as operational ones; profitability; and leverage ratio; among tanker, dry bulk and container shipping markets.

A regime switching approach for hedging tanker shipping freight rates

Tanker shipping is the primary means for the transportation of petroleum and petroleum products around the world and thus plays a crucial role in the energy supply chain. However, the high volatility of tanker freight rates has been a major concern for market participants and led to the development of the tanker freight derivatives in the form of forward freight agreements (FFAs). The aim of this paper is to investigate the performance of these instruments in managing tanker freight rate risk. Using a data set for six major tanker routes covering the period between 2005 and 2013, we examine the effectiveness of alternative hedging methods, including a bivariate Markov Regime Switching GARCH model, in hedging tanker freight rates. The regime switching GARCH specification links the concept of equilibrium freight rate determination underlying different market conditions and the dynamics of the conditional second moments across high and low volatility regimes. Overall, we find evidence supporting the argument that the tanker freight market is characterized by different regimes. However, while the use of a regime switching model allows for a significant improvement in the performance of the hedge in-sample, out-of-sample results are mixed.

Spillover effect of international crude oil market on tanker market

The tanker shipping market has been regarded as a key extension of the global oil market and its uncertainty is related to the volatility of oil market. Therefore, for improving transportation risk management of oil shipping companies and oil imports countries, it is of significance to investigate the spillover effects across the oil market and the tanker market. Taking the volatility breaks into account, this paper establishes a VAR-BEKK-GARCH model for both the entire sample period from 1 June 2006 to 1 April 2014 and two sub-period samples. The empirical results provide evidence that the volatility of Brent market has more significant impacts on the tanker market than the WTI market in general. Moreover, the influence of oil markets on the tanker market during sub-sample 1 period (1 June 2006-23 April 2009) is stronger than that in sub-sample 2 (24 April 2009-1 April 2014).

Developing environmental sustainability by ANP-QFD approach: the case of shipping operations

As a key trade facilitator, the impact of shipping on the global economy and societies cannot be underestimated. However, there are increasing trends of carbon emission caused by the shipping industry and the related cargo flow activities. As such, the adoption of green shipping practices (GSP) is increasingly popularized by shipping companies. This study aims to develop a decision-support model with systematic metrics for shipping companies to attain environmental sustainability in their operations. An integrated analytical approach which combines Analytical Network Process (ANP) with Quality Function Deployment (QFD) is proposed to serve this purpose. A case study of an international tanker shipping company is used to demonstrate the application of this approach to enhance eco-efficiency. The case results show how the ANP-QFD model can be deployed to understand customers' expectation for environmental management and develop operational measures for shipping companies to achieve environmental and market-oriented outcomes. Accordingly, this study develops the concept of Customer Cooperation Programme for Sustainability in the shipping management context. From the practical standpoint, shipping firms that emphasize sustainability as a competitive priority will benefit by communicating sustainability efforts to better serve their customers, particularly those keen on environmental preservation. The ANP-QFD approach is an integrative method helpful for shipping managers to incorporate the ‘voice’ of customers for greening into their decision-making and operations processes. The decision-support tool is useful for shipping companies to meet customer requirements for environmental performance and thus progress towards achieving more sustainable performance outcomes.

Identifying the dynamic relationship between tanker freight rates and oil prices: In the perspective of multiscale relevance

The tanker shipping market has been treated as the key extension of the world oil market and inevitably, its uncertainty is correlated to volatility of the oil market, besides supply and demand factors. Therefore, for improving operational management and budget planning decisions, it is essential to understand the inherent relevance between freight rates and crude oil prices. Taking time-dependent features into account, this paper focuses on the multiscale correlation between freight rates and oil prices. Given the complexity and mutability of tanker freight rate process, this paper first extracts the intrinsic mode functions from the original data using the Ensemble Empirical Mode Decomposition model and then reconstructs two separate composite functions: high-frequency and low-frequency components, plus the residual as the long-term trend. Secondly, correlations of the multiscale components of freight rates and oil prices are examined based on relevance structure. Empirical results show that tanker freight rates and oil prices exhibit different multiscale properties with true economic meaning and are significantly correlated in the medium and the long term when taking the relevance structure into account. These findings offer some useful information to better understand the correlations between these two markets and more importantly, propose a novel perspective to investigate the dynamic relationship between two markets.

Measuring level of risk exposure in tanker shipping freight markets

This is an attempt to study the volatility structure of the tanker freight market and its exposure to market shocks. Therefore, we introduce a two state regime to investigate the possibility of two different volatility structures in shipping tanker freight markets. Empirical evidence is found that in general terms, shipping tanker freight returns, shift between two regimes, a high volatility regime and a low volatility regime and that market shocks in general increase the volatility of freight returns and has a lasting effect. In regards to measuring freight risk, it seams that semi-parametric approaches are appropriate methods for measuring level of risk exposure for shipping freight markets.

Investigation of main particulars subject to minimum building cost for chemical tankers

The maritime transportation sector is rapidly growing depending on the global growth, hence chemical tanker shipping is positively being affected concordantly. Detailed analyses are required to define costs accurately at the preliminary design stage as shipbuilding projects require high levels of financing which may be affected by daily price fluctuations in the global economic system.In this study, empirical formulas are derived in order to estimate the principal particulars, main engine power, weight components and costs of the chemical tankers less than 30,000DWT in the preliminary design stage. Utilizing the formulas that are derived from the data of recently built vessels; an approach based on systematic analysis method is presented to determine the principle particulars of the optimum vessel subject to minimum building costs of chemical tankers, which have different speeds and tonnages. In this study, three applications for the estimation of preliminary design parameters and investigation of optimum particulars are carried out. Consequently, it is shown that the preliminary design parameters can be estimated with fairly low errors and initial building costs can be decreased by up to 9% by optimizing the main particulars.

Lead–lag relationship between new-building and second-hand ship prices

We examine lead–lag relationships between new-building and second-hand ship prices. Our analysis shows the existence of a one-directional lead–lag relationship between two ship prices. The direction of lead–lag relationship is not affected by the time evolution and age of second-hand ships, but is affected by the division of shipping sector. Particularly, directions of ship price movements in dry bulk and tanker shipping sectors are opposite. We argue that the opposite directional lead–lag relationships are caused by the difference in competition levels and the difference in the purposes of trading in the two shipping sectors.

Forecasting Baltic Dirty Tanker Index by Applying Wavelet Neural Networks

Baltic Exchange Dirty Tanker Index (BDTI) is an important assessment index in world dirty tanker shipping industry. Actors in the industry sector can gain numerous benefits from accurate forecasting of the BDTI. However, limitations exist in traditional stochastic and econometric explanation modeling techniques used in freight rate forecasting. At the same time research in shipping index forecasting e.g. BDTI applying artificial intelligent techniques is scarce. This analyses the possibilities to forecast the BDTI by applying Wavelet Neural Networks (WNN). Firstly, the characteristics of traditional and artificial intelligent forecasting techniques are discussed and rationales for choosing WNN are explained. Secondly, the components and features of BDTI will be explicated. After that, the authors delve the determinants and influencing factors behind fluctuations of the BDTI in order to set inputs for WNN forecasting model. The paper examines non-linearity and non-stationary features of the BDTI and elaborates WNN model building procedures. Finally, the comparison of forecasting performance between WNN and ARIMA time series models show that WNN has better forecasting accuracy than traditionally used modeling techniques.

Key Performance Indicators (KPIs) and Shipping Companies Performance Evaluation: The Case of Greek Tanker Shipping Companies

If you are not sure where you are, how will you find out where to go? The aim of this paper is to examine the applicability and usefulness of performance indicators in shipping management performance and evaluation. The paper brings the importance of KPIs closer to the reader and examines their definition, purpose and role in the shipping market. The first part is devoted to literature review on KPIs. The second part is the methodology, where a questionnaire is taken across the tanker shipping companies in Greece. The third part is the analysis of the questionnaire which showed that even though many Greek tanker enterprises recognize the benefits of performance indicators, a small percentage of them use some types of KPIs. The final part is the conclusion.

Regulating oil tankers in Canadian waters

On the west coast of Canada, environmental concerns have prompted recent legislative attempts to ban, or limit oil tanker traffic over large portions of Canadian waters. The rising tide of popular sentiment is fuelled by the belief that a tanker ban is the only way to prevent an oil spill from damaging the marine environment. Seldom included in the debate is any analysis of the consistency of Canada’s oil tanker policy.This article will explore the specific policy commitments that govern deep-sea tanker shipping in Canada. Some of the outcomes of the present safety and environmental framework that govern bulk oil shipments will be provided along with reference to the kind of measures that are permitted under the law to deal with those concerned about tanker traffic. The article will conclude by considering how existing commitments affect Canada’s ability to ban oil tanker traffic and the consequences that the policy choices could have Canadian energy security and international trade interests.

Vessel and voyage determinants of tanker freight rates and contract times

The behavior of shipping freight (charter) rates and the timing of shipping contracts affect the transportation costs of charterers and the operating cash flows of shipowners. Although the literature has established macroeconomic determinants of shipping freight rates, there has been no systematic investigation of microeconomic determinants of freight rates and the delivery time of chartered ships (the laycan period) in the tanker market. Therefore, the aim of this paper is to investigate the importance of vessel and contract specific factors in the determination of tanker freight rates and laycan periods in shipping contracts. Individual tanker shipping contracts from January 2006 to March 2009 are used to estimate freight rates and laycan periods using a system of simultaneous equations. The estimation results suggest that the duration of the laycan period is an important determinant of the shipping freight rate and vice versa. Other determinants of freight rates include the vessel's hull type, fixture deadweight utilization ratio, vessel age, and voyage routes. Determinants of the laycan period include the former determinants as well as the Baltic Dirty Tanker Index and its volatility.