An empirical study of voyage chartering practices in the tanker market

Abstract

Chartering activities play a major role in the shipping industry. The number of charter-parties fixed in a period of time can reflect the status of the world economy by providing an indication of the import and exports volumes of worldwide raw materials. The tanker market is the most important segment in chartering as it is the largest for weight and value of liquid bulk cargoes transported. The study has a threefold objective: 1) to find out which factors among the ones taken into account (DWT, vessel’s age, frequency, cargo quantity, bunker prices, Clarkson weekly tanker index, nautical miles) are most likely to influence freight rates determination and what their magnitude is in the tanker segment in 2016; 2) to investigate whether charters’ frequency to fix charter-parties is a major factor in freight rates determination and; 3) to find out differences in the magnitude of selected factors by comparing ship size (Aframax vs. Suezmax vs VLCC). The findings of the paper show that factors with the largest effects and most likely to impact freight rates determination are cargo quantity, nautical miles, bunker price and frequency. Secondly, the frequency play only a minor role in affecting freight rates when Ordinary Least Square (OLS) is applied. Finally, when the results obtained are compared according to ship’s type, there are some significant differences in results as variables likely to influence freight rates show distinctive magnitudes.