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Modelling and forecasting the demolition market in shipping

Author

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  • Nikos D. Kagkarakis
  • Andreas G. Merikas
  • Anna Merika

Abstract

We model the demolition market, an integral part of the international shipping industry. It is shown through the implementation of a Vector Autoregressive (VAR) model that international steel-scrap prices contribute decisively towards price discovery in the ship-demolition industry. Our finding is explained and attributed to the fact that the growth models of Southeast Asian countries, where the ship-demolition market is primarily located, rely on scrap metal imports. These are mainly obtained from the developed economies rather than the recycling of vessels. We then proceed to test the forecasting ability of our model and use it for price prediction in the ship-demolition market. We establish that it provides the decision-makers with a useful prediction tool which enables all stakeholders involved, the ship owner, the recycler and the cash buyer alike, to gain valuable insights of the underlying trend in the sector.

Suggested Citation

  • Nikos D. Kagkarakis & Andreas G. Merikas & Anna Merika, 2016. "Modelling and forecasting the demolition market in shipping," Maritime Policy & Management, Taylor & Francis Journals, vol. 43(8), pages 1021-1035, November.
    • Handle: RePEc:taf:marpmg:v:43:y:2016:i:8:p:1021-1035
    DOI: 10.1080/03088839.2016.1185181
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    References listed on IDEAS

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    1. Knapp, Sabine & Kumar, Shashi N. & Remijn, Anna Bobo, 2008. "Econometric analysis of the ship demolition market," Marine Policy, Elsevier, vol. 32(6), pages 1023-1036, November.
    2. Saujanya Sinha, 1998. "Ship Scrapping and the environment-the buck should stop!," Maritime Policy & Management, Taylor & Francis Journals, vol. 25(4), pages 397-403, October.
    3. Demaria, Federico, 2010. "Shipbreaking at Alang-Sosiya (India): An ecological distribution conflict," Ecological Economics, Elsevier, vol. 70(2), pages 250-260, December.
    4. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-692, December.
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    Cited by:

    1. Yin, Jingbo & Fan, Lixian, 2018. "Survival analysis of the world ship demolition market," Transport Policy, Elsevier, vol. 63(C), pages 141-156.
    2. Theodore Syriopoulos & Michael Tsatsaronis & Ioannis Karamanos, 2021. "Support Vector Machine Algorithms: An Application to Ship Price Forecasting," Computational Economics, Springer;Society for Computational Economics, vol. 57(1), pages 55-87, January.
    3. Mehtap TUNÇ & Abdullah AÇI, 2019. "The Impact of Steel Price on Ship Demolition Prices: Evidence from Heterogeneous Panel of Developing Countries," Sosyoekonomi Journal, Sosyoekonomi Society, issue 27(42).
    4. Yang, Zhongzhen & Jiang, Zhenfeng & Notteboom, Theo & Haralambides, Hercules, 2019. "The impact of ship scrapping subsidies on fleet renewal decisions in dry bulk shipping," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 126(C), pages 177-189.

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