Determining factors affecting second‑hand ship value : linkages and implications for the shipbuilding industry

Abstract

Inherited volatility and the vulnerability to economic conditions make shipping a challenging business. The prices of second-hand ships and newbuilding are strongly interrelated and are affected by market dynamics. Therefore, understanding factors affecting second-hand prices of ships can be crucial for countries specialize in shipbuilding to diversify their international trade participation via vessels’ exports. This study provides a framework for evaluating several influential factors on second-hand ship prices in different market segments and contributes with managerial implications supporting the shipbuilding industry from a strategic, operational and marketing perspective. This study uses an ordinary least square regression considering a total of 8948 sales transactions of second-hand vessel sales from 2008 to 2020 to determine the effect of factors as age, size and the freight on second-hand ship value. Furthermore, it investigates the effect of ships sold under a time charter agreement, country of built and the type of main engine. The findings suggest that the ships’ type of main engine and the country of build are statistically significant among most vessel categories, while other vessel-specific and economic factors also explain the value of second-hand ships consistent with the literature. Furthermore, the behaviour of the multivariate model is unique depending upon the type of ship classification, which hinders the possibility of generalization. Several implications for the shipbuilding industry are finally derived. The study contributes to existing literature by extending both the factors and type of ships (17 categories among, bulk, tankers and containers) considered in the analysis.