IDEAS home Printed from https://ideas.repec.org/a/pal/marecl/v20y2018i2d10.1057_s41278-016-0005-0.html
   My bibliography  Save this article

The dynamic relationship between freight markets and commodity prices revealed

Author

Listed:
  • Vangelis Tsioumas

    (University of Piraeus)

  • Stratos Papadimitriou

    (University of Piraeus)

Abstract

The aim of this study is to investigate empirically the relationship between the dry bulk freight markets and the prices of ‘major bulks.’ The relationship has not attracted much attention in the literature so far. However, changing commodity prices can influence the timing and quantity of imports and exports and, by extension, the volume of seaborne trade. In this context, many maritime practitioners tend to monitor the levels of commodity prices in order to obtain insights into the anticipated demand for bulk carriers. Therefore the examination of this relationship deserves further attention. The elements of our analysis consist of representative prices of coal, iron ore, and wheat, and Baltic Exchange indices that correspond to the most widely used vessel size for each commodity. In particular, we focus on the lead–lag relationship between each pair of variables, employing cointegration analysis, Granger Causality tests, and Impulse Response analysis. Our results imply the existence of a bidirectional relationship in the cases of iron ore and coal, while they indicate that wheat price leads the Baltic Panamax Index but the opposite is not true. These findings can support decision making in both dry bulk chartering and commodity trading.

Suggested Citation

  • Vangelis Tsioumas & Stratos Papadimitriou, 2018. "The dynamic relationship between freight markets and commodity prices revealed," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 20(2), pages 267-279, June.
    • Handle: RePEc:pal:marecl:v:20:y:2018:i:2:d:10.1057_s41278-016-0005-0
    DOI: 10.1057/s41278-016-0005-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41278-016-0005-0
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41278-016-0005-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Alizadeh, Amir H. & Nomikos, Nikos K., 2004. "Cost of carry, causality and arbitrage between oil futures and tanker freight markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 40(4), pages 297-316, July.
    2. Trostle, Ronald, 2008. "Factors Contributing to Recent Increases in Food Commodity Prices (PowerPoint)," Seminars 43902, USDA Economists Group.
    3. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    4. Michael S. Haigh & David A. Bessler, 2004. "Causality and Price Discovery: An Application of Directed Acyclic Graphs," The Journal of Business, University of Chicago Press, vol. 77(4), pages 1099-1121, October.
    5. Tun‐Hsiang (Edward) Yu & David A. Bessler & Stephen W. Fuller, 2007. "Price Dynamics in U.S. Grain and Freight Markets," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 55(3), pages 381-397, September.
    6. Manolis Kavussanos & Ilias Visvikis & Dimitris Dimitrakopoulos, 2010. "Information linkages between Panamax freight derivatives and commodity derivatives markets," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 12(1), pages 91-110, March.
    7. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    8. Angela Poulakidas & Fred Joutz, 2009. "Exploring the link between oil prices and tanker rates," Maritime Policy & Management, Taylor & Francis Journals, vol. 36(3), pages 215-233, June.
    9. Michael S. Haigh & Henry L. Bryant, 2000. "The effect of barge and ocean freight price volatility in international grain markets," Agricultural Economics, International Association of Agricultural Economists, vol. 25(1), pages 41-58, June.
    10. McNew, Kevin, 1996. "Spatial Market Integration: Definition, Theory, And Evidence," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 25(1), pages 1-11, April.
    11. David A. Bessler & Seongpyo Lee, 2002. "Money and prices: U.S. Data 1869-1914 (A study with directed graphs)," Empirical Economics, Springer, vol. 27(3), pages 427-446.
    12. McNew, Kevin, 1996. "Spatial Market Integration: Definition, Theory, and Evidence," Agricultural and Resource Economics Review, Cambridge University Press, vol. 25(1), pages 1-11, April.
    13. Andrew M. McKenzie, 2005. "The effects of barge shocks on soybean basis levels in Arkansas: A study of market integration," Agribusiness, John Wiley & Sons, Ltd., vol. 21(1), pages 37-52.
    14. Sadorsky, Perry, 1999. "Oil price shocks and stock market activity," Energy Economics, Elsevier, vol. 21(5), pages 449-469, October.
    15. Bertrand M. Roehner, 1996. "The Role of Transportation Costs in the Economics of Commodity Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 339-353.
    16. Barry K. Goodwin & Ted C. Schroeder, 1991. "Price Dynamics in International Wheat Markets," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 39(2), pages 237-254, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sel, Burakhan & Minner, Stefan, 2022. "A hedging policy for seaborne forward freight markets based on probabilistic forecasts," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 166(C).
    2. Sun, Xiaolei & Liu, Chang & Wang, Jun & Li, Jianping, 2020. "Assessing the extreme risk spillovers of international commodities on maritime markets: A GARCH-Copula-CoVaR approach," International Review of Financial Analysis, Elsevier, vol. 68(C).
    3. Ioannis Karaoulanis & Theodore Pelagidis, 2021. "Panamax markets behaviour: explaining volatility and expectations," Journal of Shipping and Trade, Springer, vol. 6(1), pages 1-24, December.
    4. Adewuyi, Adeolu O. & Adeleke, Musefiu A. & Tiwari, Aviral Kumar & Aikins Abakah, Emmanuel Joel, 2023. "Dynamic linkages between shipping and commodity markets: Evidence from a novel asymmetric time-frequency method," Resources Policy, Elsevier, vol. 83(C).
    5. Arunava Bandyopadhyay & Prabina Rajib, 2023. "The asymmetric relationship between Baltic Dry Index and commodity spot prices: evidence from nonparametric causality-in-quantiles test," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 36(2), pages 217-237, June.
    6. Angelopoulos, Jason & Sahoo, Satya & Visvikis, Ilias D., 2020. "Commodity and transportation economic market interactions revisited: New evidence from a dynamic factor model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    7. Yimiao Gu & Zhenxi Chen & Qingyang Gu, 2022. "Determinants and international influences of the Chinese freight market," Empirical Economics, Springer, vol. 62(5), pages 2601-2618, May.
    8. Wei, Jiangqiao & Ma, Zhe & Wang, Anjian & Li, Pengyuan & Sun, Xiaoyan & Yuan, Xiaojing & Hao, Hongchang & Jia, Hongxiang, 2022. "Multiscale nonlinear Granger causality and time-varying effect analysis of the relationship between iron ore futures and spot prices," Resources Policy, Elsevier, vol. 77(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maitra, Debasish & Chandra, Saurabh & Dash, Saumya Ranjan, 2020. "Liner shipping industry and oil price volatility: Dynamic connectedness and portfolio diversification," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 138(C).
    2. Arunava Bandyopadhyay & Prabina Rajib, 2023. "The asymmetric relationship between Baltic Dry Index and commodity spot prices: evidence from nonparametric causality-in-quantiles test," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 36(2), pages 217-237, June.
    3. Angelopoulos, Jason & Sahoo, Satya & Visvikis, Ilias D., 2020. "Commodity and transportation economic market interactions revisited: New evidence from a dynamic factor model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    4. Bradley Isbell & Andrew M. McKenzie & B. Wade Brorsen, 2020. "The cost of forward contracting in the Mississippi barge freight river market," Agribusiness, John Wiley & Sons, Ltd., vol. 36(2), pages 226-241, April.
    5. Jinghua Wang & Geoffrey Ngene, 2018. "Symmetric and asymmetric nonlinear causalities between oil prices and the U.S. economic sectors," Review of Quantitative Finance and Accounting, Springer, vol. 51(1), pages 199-218, July.
    6. Yu, Tun-Hsiang & Bessler, David A. & Fuller, Stephen W., 2006. "The Influence of Transportation Rates on Grain Prices: A Dynamic Analysis," 47th Annual Transportation Research Forum, New York, New York, March 23-25, 2006 208036, Transportation Research Forum.
    7. Rahman, Mohammad Chhiddikur, 2020. "Welfare Impact of Asymmetric Price Transmission on Bangladesh Rice Consumers," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 242248, September.
    8. Ganneval, S., 2016. "Spatial price transmission on agricultural commodity markets under different volatility regimes," Economic Modelling, Elsevier, vol. 52(PA), pages 173-185.
    9. Adjemian, Michael K. & Janzen, Joseph & Carter, Colin A. & Smith, Aaron, 2014. "Deconstructing Wheat Price Spikes: A Model of Supply and Demand, Financial Speculation, and Commodity Price Comovement," Economic Research Report 167369, United States Department of Agriculture, Economic Research Service.
    10. Mehmet Balcilar & İsmail H. Genç & Rangan Gupta, 2016. "The Links between Crude Oil Prices and GCC Stock Markets: Evidence from Time-Varying Granger Causality Tests," Working Papers 201644, University of Pretoria, Department of Economics.
    11. Sun, Xiaolei & Liu, Chang & Wang, Jun & Li, Jianping, 2020. "Assessing the extreme risk spillovers of international commodities on maritime markets: A GARCH-Copula-CoVaR approach," International Review of Financial Analysis, Elsevier, vol. 68(C).
    12. Sun, Xiaolin & Haralambides, Hercules & Liu, Hailong, 2019. "Dynamic spillover effects among derivative markets in tanker shipping," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 122(C), pages 384-409.
    13. Jerzy Rembeza & Kamila Radlińska, 2020. "Price Linkages Between Tea Markets: A Case Study for Colombo, Kolkata and Mombasa Auctions," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 134-150.
    14. Shahani, Rakesh & Paliwal, Riya, 2020. "An empirical analysis of the Co-movement of Crude, Gold, Rupee-Dollar Exchange rate and Nifty 50 Stock Index during Sub-prime and Coronavirus crisis periods," MPRA Paper 103568, University Library of Munich, Germany.
    15. Maitra, Debasish & Rehman, Mobeen Ur & Dash, Saumya Ranjan & Kang, Sang Hoon, 2021. "Oil price volatility and the logistics industry: Dynamic connectedness with portfolio implications," Energy Economics, Elsevier, vol. 102(C).
    16. Le, Thai-Ha & Chang, Youngho, 2015. "Effects of oil price shocks on the stock market performance: Do nature of shocks and economies matter?," Energy Economics, Elsevier, vol. 51(C), pages 261-274.
    17. Ftiti, Zied & Hadhri, Sinda, 2019. "Can economic policy uncertainty, oil prices, and investor sentiment predict Islamic stock returns? A multi-scale perspective," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 40-55.
    18. Wang, Lu & Ma, Feng & Niu, Tianjiao & He, Chengting, 2020. "Crude oil and BRICS stock markets under extreme shocks: New evidence," Economic Modelling, Elsevier, vol. 86(C), pages 54-68.
    19. Wetzstein, Brian & Florax, Raymond & Foster, Kenneth & Binkley, James, 2021. "Transportation costs: Mississippi River barge rates," Journal of Commodity Markets, Elsevier, vol. 21(C).
    20. Xu Huang & Emmanuel Silva & Hossein Hassani, 2018. "Causality between Oil Prices and Tourist Arrivals," Stats, MDPI, vol. 1(1), pages 1-21, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:marecl:v:20:y:2018:i:2:d:10.1057_s41278-016-0005-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.