Asymmetric causality from commodity prices to shipping markets: an empirical research on ISTFIX region

Abstract

Dry bulk shipping is influenced mainly by demand for commodities due to its derived demand structure. As one of the main determinants of the commodity demand is the price, interactions between commodity prices and freight rates are inevitable. However, the relevant literature is limited and information asymmetry is not taken into account. The aim of this study is to examine the asymmetric causality from the prices of the commodities mostly transported in Istanbul Freight Index (ISTFIX) region to the freight rates by method developed by Hatemi-J (2012a). The dataset consists of 122 monthly observations covering the dates between January 2008 and February 2018. The results reveal that positive and negative shocks in coal and steel prices are symmetrically causes of the positive and negative shocks in ISTFIX while negative shocks in wheat prices are cause of positive shocks in the index, and positive shocks in the commodity are the causes of negative shocks in the index.

Agent based interaction of commodity price and freight market

“…Based on this research question, we tested the effects of coal, steel, and wheat prices, which are primarily transported in the region, on the freight rates by implementing a unidirectional asymmetric causality test (Açık and Başer, 2020). As a result of the analyses that we applied considering the non-linearity in the series, significant causal relationships were found between the positive-positive shocks and the negative-negative shocks from the coal and steel prices to the freight index.…”

“…Considering that commodities' prices also carry information about their supply and demand, there may be an interaction between commodity prices and freight markets. This possible interaction has also been studied in the maritime economics literature, and significant results have been achieved (Kavussanos et al, 2010;Kavussanos et al, 2014;Chou et al, 2015;Tsioumas and Papadimitriou, 2018;Açık and Başer, 2018a;Açık and Başer, 2018b;Açık and İnce, 2019;Açık and Başer, 2019;Başer and Açık, 2019;Açık and Başer, 2020;Angelopoulos et al, 2020). In these studies, interactions in derivative markets and over past prices were examined.…”

Risk and Volatility Spillover Between Commodity and Freight Market An Application on Capesize Freight Market

“…Studies examining the relationship between commodity prices and maritime markets are summarized in Table 2. In general, if these studies are to be grouped according to their relationship with commodity markets, they can be categorized as those related to the freight market (Chou et al, 2015;Tsioumas and Papadimitriou, 2018;Açık and Başer, 2019;Açık and İnce, 2019;Açık and Başer, 2020;Angelopoulos et al, 2020), those related to the derivatives market (Kavussanos et al, 2010;Kavussanos et al, 2014), those related to the second hand market (Başer and Açık, 2019), and other types of studies (Açık and Başer, 2018a;Açık and Başer, 2018b).…”

“…This study reveals that the results can differ according to the type of cargo and the type of ship too. In our study where we analyzed the relationship between freights and commodity prices in a more regional way (Açık and Başer, 2020), we analyzed the unidirectional asymmetric relationship between İSTFİX freights and commodity prices that are intensively transported in the region, which are coal, steel and wheat. As a result of the analyzes that we applied considering the non-linearity in the series, significant causal relationships were found between the positive-positive shocks and the negativenegative shocks from the coal and steel prices to the freight index.…”

“…In this case, it is likely that there is a relationship between commodity prices and freight rates, which are basically a reflection of the demand for maritime transport. This relationship has formed the research question of many researchers in the literature (Kavussanos et al, 2010;Kavussanos et al, 2014;Chou et al, 2015;Tsioumas and Papadimitriou, 2018;Açık and Başer, 2019a;Açık and İnce, 2019;Açık and Başer, 2020;Angelopoulos et al, 2020), which have also achieved significant results. We aimed to examine the relationship between iron ore, coal and grain prices, which are the three main cargoes in the dry bulk market, and Capesize freights in three different routes.…”