Analysis of structural changes in container shipping

A number of studies have investigated the dynamics of shipping markets because of their volatility, unpredictability and risk. However, most of them have focused on bulk and tanker markets because the container market is relatively new and long-run correlation is not identified using general cointegration methods. This article tries to analyze the dynamic interrelationship among newbuilding prices, time charter rates and second-hand ship prices in the container market. Our methodology consists of the Johansen's Vector Autocorrelation Model to test the existence of long-run relationships and it purports to show that the failure of the cointegration test is caused by the existence of structural changes in the relationship among these variables. After recognizing the newbuilding price as dependent variable by the use of the causality test, we identify the number of structural breaks and the specific coefficients in each regime for the overall and each sub-market, using Bai-Perron's multiple structural changes test. The result confirms the existence of structural changes in the correlation among ship prices and freight rates. It also suggests that in a decreasing market, the newbuilding price is more active than the time charter rate and the second-hand price. In an increasing market instead, the time charter rate is more active; and in a matured stable situation, the second-hand market is more flourishing.