The Dynamics of Dry Bulk Shipping Market Under the Shipping Cycle Perspective: Market Relationships and Volatility

The shipping industry plays an essential role in world trade. For shipping companies, having an accurate view of the markets and grasp of the interactions between the freight market, second-hand ship market, and the newbuild ship markets is essential. The shipping market cycles are divided into four periods (trough, recovery, peak, and recession) based upon shipping cycle theory. The current shipping markets have been stuck in the trough period since the financial crisis in 2008. This paper investigates the recovery period and causality relationship between the freight rate, second-hand price, and new-build ship price, in the dry bulk shipping market and applies the Granger causality test at each stage of the cycle based on quantitative analysis. The results show that the recovery period and causality relationship can be identified only during the trough and peak periods. When comparing the results for the trough period before and after the financial crisis, we find similarities between the two periods, leading us to conclude that the shipping cycle rules still apply.