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Analyzing ship investment behaviour in liner shipping

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  • Lixian Fan
  • Meifeng Luo

Abstract

This study analyzes capacity expansion and ship choice decisions. Theoretically, we derive the probability of capacity expansion as a function of market and company attributes and characterize the impacts of these factors on expansion decisions. Empirically, we analyze ship investment and ship choice behaviour using binary choice and nested logit models based on ship investment data from major liner shipping companies over the period 1999 to 2009. Most expansion decisions are found to be market-driven, and large companies expand to maintain their market shares. In terms of ship selection, statistical results support the assumption that shipping companies decide on a new order or second-hand purchase before considering the ship size. Also, new orders are preferable to second-hand purchases. For new orders, the preference increases with ship size, and decreases with shipbuilding length and demand growth rate. For all ship types, the preference increases with a high and stable time-charter rate. For second-hand ships, handysize is the most preferable size. The substitution of new orders and second-hand purchases is possible, but not symmetrical.

Suggested Citation

  • Lixian Fan & Meifeng Luo, 2013. "Analyzing ship investment behaviour in liner shipping," Maritime Policy & Management, Taylor & Francis Journals, vol. 40(6), pages 511-533, November.
    • Handle: RePEc:taf:marpmg:v:40:y:2013:i:6:p:511-533
    DOI: 10.1080/03088839.2013.776183
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    References listed on IDEAS

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    1. Andreas G. Merikas & Anna A. Merika & George Koutroubousis, 2008. "Modelling the investment decision of the entrepreneur in the tanker sector: choosing between a second-hand vessel and a newly built one," Maritime Policy & Management, Taylor & Francis Journals, vol. 35(5), pages 433-447, October.
    2. Meifeng Luo & Lixian Fan & Liming Liu, 2009. "An econometric analysis for container shipping market," Maritime Policy & Management, Taylor & Francis Journals, vol. 36(6), pages 507-523, December.
    3. Alizadeh, Amir H. & Nomikos, Nikos K., 2007. "Investment timing and trading strategies in the sale and purchase market for ships," Transportation Research Part B: Methodological, Elsevier, vol. 41(1), pages 126-143, January.
    4. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
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    Cited by:

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    8. Ying Kou & Meifeng Luo, 2016. "Strategic capacity competition and overcapacity in shipping," Maritime Policy & Management, Taylor & Francis Journals, vol. 43(4), pages 389-406, May.
    9. Keun-Sik Park & Young-Joon Seo & A-Rom Kim & Min-Ho Ha, 2018. "Ship Acquisition of Shipping Companies by Sale & Purchase Activities for Sustainable Growth: Exploratory Fuzzy-AHP Application," Sustainability, MDPI, vol. 10(6), pages 1-13, May.
    10. Fan, Lixian & Li, Ziyan & Xie, Jiaqi & Yin, Jingbo, 2023. "Container ship investment Decisions―Newbuilding vs second-hand vessels," Transport Policy, Elsevier, vol. 143(C), pages 1-9.
    11. Changmin Jiang & Yulai Wan & Anming Zhang, 2017. "Internalization of port congestion: strategic effect behind shipping line delays and implications for terminal charges and investment," Maritime Policy & Management, Taylor & Francis Journals, vol. 44(1), pages 112-130, January.
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