Econometric analysis of the ship demolition market

Abstract:

The topic of ship recycling has obtained considerable attention during the last two decades for a variety of reasons with the likelihood of the adoption of a new international convention under the auspices of the International Maritime Organization (IMO). This study applies econometric modeling to a unique data set to provide insight into the dynamics of the ship recycling market. The data set contains information on 51,112 ships over 100 gt and includes 748,621 events over a period of 29 years. The analysis confirms a negative relationship of earnings and a positive relationship of scrap prices for all locations while Bangladesh seems to be more sensitive to changes in earnings than the other locations and more likely demolishes larger and older vessels. The results for flag and ownership vary across scrapping locations with Malta and Cyprus indicating potential importance from a registry perspective. The overall safety profile of a vessel seems to be less important towards the probability of a ship being scrapped. Possible implementation of the convention at EU level will mostly likely affect Turkey while non-ratification of one of the major flags will most likely affect China or Bangladesh.

Keywords:

Recycling of ships; Ship scrapping; Ship demolition; Probability of scrapping; International convention on ship recycling; Econometric modeling; Binary logistic regression

Article Outline:

1. Introduction

2. Economic overview of the shipping markets

3. Combination of data set and variables used in analysis

4. Econometric analysis—the probability of scrapping

4.1. Explanation of models used

4.2. Summary of results

4.3. Visualization of results

5. Discussion of results and conclusions

Acknowledgements

Appendix A. Summary of key statistics

References

Authors:

Sabine Knappa, a,  Shashi N. Kumarb, b, 1,   and Anna Bobo Remijn c,  

aEconometric Institute, Erasmus University, P.O. Box 1738, NL-3000 DR Rotterdam, The Netherlands

bUnited States Merchant Marine Academy,

300 Steamboat Road, Kings Point, NY

11024, USA

cEuropean Maritime Safety Agency, Avenida Dom Joao II, Lote 1.06.2.5, 1998-001 Lisbon, Portugal

Corresponding author- Tel.: +351 911999663; fax: +31 104089162.

1 The report and related findings discussed in this paper do not reflect the view of the United States Maritime Administration and the European Maritime Safety Agency.

Accessed on: 15 February 2011

Source Link:

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