THE REACTIONS OF VESSEL SPEEDS TO BUNKER PRICE CHANGES IN DRY BULK MARKET
The biggest operational cost of vessels in shipping is fuel costs. As the ship's sailing speed increases, the fuel consumption also increases in cubic and incurs an incredible cost to the shipowners. For this reason, when the market is not alive and the fuel price is high, the vessels tend to sail in slow steam and save costs. From this point of view, a nonlinear causal relationship between fuel price and vessel sailing speed is inevitable. The purpose of this study is to determine the causal relationship between fuel prices and vessel speeds in the dry bulk market. In this direction, asymmetric causality test is used, considering that market agents give different responses to different news. Asymmetric causality test allows to determine the causal relation between the positive and negative shocks in different variables by separating them as positive and negative. The data set consists of 122 observations on a monthly basis covering the period from May 2008 to June 2018. The results revealed, there is an asymmetric causality from positive shocks at fuel prices to negative shocks at average vessel speeds. This indicates that shipowners are reacting instantly to positive fuel prices shocks by slowing down vessel speeds as the fuel costs constitute large share of operational costs. But the flexibility of not responding to a drop in fuel prices instantaneously by increasing vessel speed can stem from commercial strategies and competitive concerns. At this point, this study has an important contribution to the literature in terms of examining this relationship on the basis of causality and observing the asymmetric relations between bunker price and vessel speed at a more macro scale.
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